May 25, 2000

Arizona chip maker buys Puyallup plant

An Arizona computer chip maker has agreed to buy the deluxe Puyallup microchip plant that Matsushita Semiconductor Corp. built and promptly mothballed in 1997.

Microchip Technology Inc. of Chandler, Ariz., said it expects to employ about 100 people at the 710,000-square-foot plant by the end of this year and reach more than 1,000 employees there within 10 years.

Matsushita paid $250 million to build and equip the Puyallup plant in 1997 but was asking $88 million for it. The sales price was not disclosed, but brokers say the company was very pleased with Microchip's offer.

Puyallup Mayor Don Malloy called this "a welcome addition to our community and tax rolls."

Microchip estimated the plant eventually could generate $1.5 billion in annual sales, more than doubling the company's current capacity.

Representatives of Microchip and Matsushita declined to disclose the price Microchip expects to pay if the purchase closes in July, as expected. Interviews indicated the price likely exceeds the $88 million Matsushita asked for but doesn't reach the $250 million Matsushita paid to build and equip the plant in 1997.

"The only information is the facility was available at an $88 million asking price and the seller was very pleased with the offer," said Stephen Rothrock, who led a team of Colliers International brokers in marketing the 92-acre property for Matsushita during the past year.

"I think it's fair to say it's the most significant sale of a semiconductor chip facility in North America in the past three years," when chip makers were shutting down plants, said Rothrock, head of Colliers' corporate services division. "Nobody's been over $60 million."

The Puyallup plant features an expensive, state-of-the-art, 100,000-square-foot clean room.

Microchip Technology plans to install about $100 million worth of equipment in the plant, said company spokesman Eric Sells. Installation of wafer processing equipment will begin in October with production to start in August 2001, Sells said.

The company has already placed a few employees at the plant to set up offices to collect and process applications for jobs at the plant, Sells said.

Microchip's lead product is PICmicro RISC microcontrollers, which serve 8- and 16-bit embedded control applications.

Matsushita put the plant up for sale without ever using it because the microchip market fell apart just as construction finished. The microchip market recently started surging back and chip makers are scrambling to ramp up production facilities.

"Just about everybody is bringing on additional capacity (to produce chips)," Sells said.

Rothrock said the 20 most-interested buyers were all electronics firms. Five chip makers made serious offers.

Matsushita didn't simply take the "for sale" sign off the plant and ramp up production there itself because when the company opted to shutter the plant it also left that segment of the chip market entirely, Rothrock said. "They made the decision to two years ago to get out of the D-RAM business altogether."

Matsushita started making chips at the Puyallup plant in 1982.

Microchip Technology was planning to build a new chip fabrication plant in Arizona but halted that plan because gearing up the Puyallup plant will take about half the time, spokesman Sells said.

Microchip Technology operates production plants in Chandler and Tempe, Ariz., and an assembly and test facility near Bangkok, Thailand. The company, traded on Nasdaq, employs 2,600 people worldwide.

Sells said the new Chandler plant would have cost about $400 million to build and equip, roughly equal to the cost of buying and equipping the Puyallup plant.

"The costs are relatively the same," he said. "However, our next 'fab' in Chandler would take two to 2 1/2 years to bring online. We can get to volume production in Puyallup in half that time."

Given his $100 million figure for equipping the Puyallup plant, this suggests Matsushita will receive well above the $88 million asking price.

A Puyallup-based maker of syringes in April publicly stated that it hoped to buy the Matsushita plant. But the company, Tri-Ject International Corp., never submitted a formal offer, said Tri-Ject's broker, Bill Stegeman of Kidder Mathews & Segner's Tacoma office.

"Tri-Ject hadn't received the final funding they were seeking from venture capital people to go buy it and get it equipped," Stegeman said.