Week of May 22, 2000
  Blockbuster Deal of the Week
   from Site Selection's exclusive New Plant database

$755 Million Toshiba-SanDisk Deal
Creating 600 New Virginia Jobs

It was a deal that evoked the immortal words of that distinguished real estate guru, Yogi Berra: "It's déjà vu all over again."

The killer app (at least for the moment) has done it again. The same market spike that produced last week's Blockbuster Deal of the Week -- Fujitsu Microelectronics' US$550 million flash-memory expansion at its Oregon chip operation -- continues with a vengeance. Toshiba (www.toshiba.co.jp) and SanDisk (www.sandisk.com) have now forged a pact to create a new semiconductor company, FlashVision LLC, which is investing $750 million and hiring 600 new employees in Manassas, Va.

As with Fujitsu, FlashVision (www.flash-vision.com) will produce advanced flash-memory chips for the snowballing personal communications services (PCS) market. But while the site Fujitsu picked was part of its 1997 pullout from the DRAM nosedive, the FlashVision location search rattled around a bit like a Shaquille O'Neal free throw.

Dominion Had Already
Spent $1.7 Billion at Site

Unlike some of Shaq's free throws, this one wasn't an air ball. It did finally come down somewhere.

As things turned out, the joint-venture's production will take place at a familiar site: Dominion Semiconductor (www.dominionsc.com), itself a joint venture between IBM and Toshiba America Electronic Components, Toshiba's U.S. subsidiary for electronic components manufacturing, marketing and sales. (Toshiba announced in July of 1999 that it's buying out IBM's share of Dominion, with the ownership transfer scheduled for completion no later than December 2000.)

The Dominion Semiconductor site is certainly no stranger to heavyweight investments. Since it came to Manassas in 1995, Dominion has ponied up a capital investment of $1.7 billion and increased its capacity by 50 percent.

FlashVision in Manassas will manufacture flash-memory chips that will replace 35-millimeter film, compact disks and other devices in cameras and phones.

In addition to the FlashVision production, the agreement includes other cooperative efforts that could create more jobs.

Specifically, Toshiba and SanDisk will work together to develop 512-megabit, 1-gigabit and 2-gigabit flash memories, plus future-generation flash memories employing 0.16- and 0.13-micron process technologies. The flash-memory devices will utilize SanDisk's proprietary multilevel-cell-flash technology. In addition, the agreement provides for the two companies to develop advanced controllers, including Secure Digital Memory Card controllers.

Toshiba Semiconductor President and CEO Yasuo Morimoto mentioned the companies' synergies while speaking at the FlashVision announcement

"FlashVision will bring together Toshiba's advanced semiconductor process technologies and SanDisk's original multilevel-cell technology," Morimoto asserted. "The company will build on the excellent potential of NAND flash to produce cost-effective, next-generation devices and can look forward to a very bright future."

A Strong-Dose Shot in the Arm
For "the Silicon Dominion"

For Virginia's semiconductor industry, the announcement was made for a very bright present. Virginia has registered notable success in landing chip facilities. Some observers have even dubbed the state "Silicon Dominion." In addition to Dominion Semiconductor, Virginia is home to a $1.5 billion White Oak facility in Henrico County, as well as an existing joint-venture fab owned by Motorola and Siemens.

However, one of Virginia's biggest success stories, a $3 billion fab announced by Motorola, hit a major stumbling block in August of 1998. That was when the Illinois-based company announced that it was putting its plans on indefinite hold for the huge fab on a 370-acre (148-ha.) Goochland County site near Richmond. Since then, Motorola hasn't divulged its intentions for the Virginia West Creek project while it's been retooling its overall strategy for chip production.

Dominion Not on Initial Short List

Retooling was also part of the location strategy that led FlashVision to Virginia, company officials disclosed.

Japan and Taiwan were reportedly the other frontrunners for the FlashVision project. The Dominion site, though, didn't even make the project's initial short list. Instead, what Dominion pulled off was something like turning the bird in the hand into two in the bush.

"When we started 18 months ago, Dominion was not among the likely sites," said Eli Harari, president and CEO of Sunnyvale, Calif.-based SanDisk. "The passion we've seen from Alex [Graham, Dominion's president and general manager] and his people . . . These guys are driving like crazy."

Crazy enough, it seems, that Dominion's ultimately won a much larger share of FlashVision's business than anyone originally projected. Officials from the two companies announced the joint venture back in October of 1999. At the time, though, the project involved only 250 new Dominion jobs in Manassas and entailed a far smaller capital investment.

But FlashVision decided to substantially ramp up Dominion output after the Virginia outfit demonstrated the right stuff to handle considerably more technology and production, say Toshiba and SanDisk officials.

"In the short time we have worked with the Dominion manufacturing team, we are impressed with their high professionalism, dedication, warm hospitality and passionate desire to help us launch FlashVision right here at Dominion in Manassas," Harari commented. "SanDisk, Toshiba, the state of Virginia and the local government are committed to work together with the Dominion team to make FlashVision a commercial success."

In something of a classic understatement, Dominion spokesman Mark Holcomb said, "This new announcement does reflect their faith."

You could say that. By 2002, the new Manassas line will produce enough advanced memory chips to account for $1 billion in annual sales, Toshiba officials explained.

"It's an incredible undertaking for us, the biggest thing SanDisk has ever done," said Harari.

Project a Likely Fast-Tracker

The $750 million Toshiba-SanDisk investment will go into equipping existing Dominion fabrication space in Manassas. The two companies will share equally in FlashVision's investment and ownership.

Officials didn't divulge an exact project timeline, since due diligence for the FlashVision agreement must first be completed. Company officials expect that process to be completed no later than June 30th this year.

Volume production of NAND flash-memory chips is expected to start sometime in "the second half of 2001," and will "achieve high-volume mass production in 2002," company officials said. If past is prologue here, the project will move on a fast track:

Dominion is located on a site that was once home to an IBM chip plant that closed in 1992. The first Dominion fab was ready for tool installation on January 1997, some 13 months after groundbreaking (despite heavy rains that stopped work for more than a month). By comparison, IBM's Building 130 semiconductor manufacturing facility, which was completed in 1986, took 36 months from groundbreaking to readiness for tool installation, according to Toshiba officials.

Dominion Official Hopes Local
Hires Fill Most New Slots

Despite the area's low unemployment rate, Dominion's Graham voiced hopes that local residents will fill almost all of the 600 new positions. He alluded, however, to the tight U.S. labor market, adding, "That gets more difficult in time, and we're very selective in our hiring process."

Gov. James S. Gilmore III, who announced the project at Manassas City Hall, presented the city with a $1 million grant, which will go to Dominion, along with the city's award of $1 million in tax breaks.

Commented Gilmore, "This decision demonstrates that Virginia has truly emerged as a leader in the semiconductor industry."

Dominion officials say that employment in Manassas could eventually reach 4,000 if demand warrants. And the Manassas site's master plan allows for building two additional wafer fabrication facilities and utility plants.

If flash-memory demand keeps producing these flashback blockbusters, it could happen. And if that's the case, FlashVision may follow the path that Yogi Berra once described so well in yet another incisive observation:

Said Yogi, "When you come to the fork in the road, . . . take it."

©2000 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.