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Micron's $3 Billion Investment Could Turn Small US Town Into Key Supplier for Self Driving Components

Micron's $3-Billion Investment Could Turn Small US Town Into Key Supplier for Self-Driving Components

By Aaron Gregg, The Washington Post | Updated: 1 September 2018 15:11 IST

Micron, a publicly traded semiconductor manufacturer based in Boise, Idaho, announced Wednesday that it plans to spend $3 billion (roughly Rs. 21,300 crores) to expand production at its plant in Northern Virginia, kicking off what Manassas mayor Hall Parrish called "the largest investment by a corporation in the Commonwealth of Virginia - ever, to my knowledge."

The expansion is expected to create 1,100 technician and engineering positions in the area by 2020, according to company estimates. A company spokesman declined to provide salary estimates but said the new positions would pay "well above average."

An initial phase of the company's production is expected to be completed in the fall of 2019 and extend through 2020. The company also promised to set up a $1 million (about Rs. 7.1 crores) scholarship fund for science and technology programs at Virginia colleges and universities.

Micron executives said the expansion deal benefited from close involvement of state and local officials.

"Micron is grateful for the extensive engagement of state and local officials since early this year to help bring our Manassas expansion to fruition," Micron President and Chief Executive Sanjay Mehrotra said in a statement. "We are excited to increase our commitment to the community through the creation of new highly skilled jobs, expanded facilities and education initiatives."

The investment is the first major economic development deal since Virginia Gov. Ralph Northam, D, took office, negotiated between the state-administered Virginia Economic Development Partnership, the city of Manassas and the state-funded Major Employment and Investment project. The company is eligible for a $70 million (around Rs. 496 crores) grant to cover site preparation and facility costs, according to Micron and the governor's office.

"Micron's expansion in the City of Manassas represents one of the largest manufacturing investments in the history of Virginia and will position the Commonwealth as a leader in unmanned systems and Internet of Things," Northam said in a statement. "We thank Micron for choosing to deepen their roots in Virginia and look forward to partnering in their next chapter of major growth."

Manassas Mayor Hal Parrish said the local tax savings Manassas offered the company could ultimately add up to "several times" the $70 million grant from the state. The city already offers Micron a continuous tax savings on a local machine and tool tax, something that is to be extended with the new investment.

Parrish characterised the expansion deal as "a good deal for America, and a good deal for Virginia."

"They could have gone anywhere in the world, and in fact they were talking to Singapore," Parrish said, "but Manassas won."

The Micron plant lies in an area of Washington's outer suburbs that has become a hub for data centres and other tech-oriented businesses. Micron has a current workforce of 1,500 employees there.

News of the expansion comes as Northern Virginia officials are hoping to persuade Amazon.com to set up its second headquarters in the area - an opportunity that promises to bring 50,000 jobs. (Amazon chief executive Jeff Bezos owns The Washington Post.)

Computing hardware manufacturers have favoured Manassas since the 1960s, when IBM set up a production centre there. It later attracted major defense contractors like Lockheed Martin and BAE systems. It is home to Aurora Flight Sciences, a market leader in developing advanced autonomous weaponry, which was acquired by Boeing last year.

But Micron departs sharply from the primarily government-focused tech businesses based in Northern Virginia in that it is an exporter. Its products are sold to large commercial industries outside the District of Columbia-area, bringing new money into the region.

For some regional economy-watchers, Micron's expansion is a welcome sign of diversification beyond white-collar, government-oriented office jobs.

"This is a gem when it comes to being export-based, and getting the kind of non-federal money we need coming into the region," said George Mason Economist Stephen Fuller. "They pay good wages for what you might consider blue collar jobs. These are smart workers but they don't necessarily need a college education to do what they do."

Micron made its entrance in 2002 when it bought Dominion Semiconductor, then a subsidiary of the Japanese electronics giant Toshiba, and it has since grown into one of the city's largest employers.

Micron itself is the fourth-largest US-based chipmaker behind Qualcomm, Broadcomm, and Intel. Unlike its larger peers, however, the company has doubled down on the market for so-called memory chips, feature nondescript trade names like DRAM, NAND, and NOR.

The company's memory chips are used to store information, in comparison to micro-processor chips made by companies like Intel, which provide computing power.

The Manassas plant expansion is part of a broader growth spurt at Micron: the company brought in $7.35 billion (approximately Rs. 52,100 crores) in the most recent quarter, a 58 percent jump from the same period a year ago. That growth has been fueled by what company spokesman David Oro called "the new data economy," in which established industries are embracing information-age technologies.

Companies that make memory chips once sold into a relatively limited market for personal and industrial computers. Today, computing resources are stretched across a vast range of tangible objects - a phenomenon referred to by tech wonks as The Internet of Things - leading to a diversification in the demand for computer chips. Micron's memory chips are now used in cars, drones, high-resolution cameras, and smartphones. Data centers needed to support new cloud-based technologies have also given the company a boost.

Keeping up with that demand has required the company to make new investments as the company pursues what chief executive Sanjay Mehrotra called "fundamental transformation, driven by changes in our markets, our industry and within our company," in a recent call with investors.

The expansion could also make Northern Virginia a player in the race to develop and market self-driving cars. Micron's Manassas plant is the site of the company's Automotive Center for Excellence, where it develops memory chips used in connected cars.

"This is especially true in the automotive field, where data is both increasing and requiring leading-edge technology to support applications within smart cockpits and advanced driver assistance systems (ADAS) as vehicles move closer to full autonomy," Oro said.

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