State Officials Lament Loss of Sematech to Texas

California’s failure to capture Sematech, the much sought-after $1.5-billion semiconductor consortium, left state officials and politicians puzzled Wednesday and worrying about the blow to the state’s chip industry.

Sematech officially confirmed that Austin, Tex., had bested San Jose and sites in 10 other states for Sematech’s principal manufacturing and development center, partly because the Texas capital had a facility that could be ready immediately.

The Sematech operation, which has been temporarily based in Santa Clara since being formed in March to ensure U.S. leadership in the $32-billion semiconductor industry, will be a boost for Texas’ battered oil-based economy. The consortium promises to have an annual operating budget of $250 million from private and government sources and provide as many as 800 jobs.

The loss was yet another setback for California, which last month failed to make the list of finalists for the $4.4-billion federal supercollider atom-smasher project. In recent years, California also missed out on an earthquake research laboratory that went to the State University of New York at Buffalo and the Microelectronics & Computer Technology Corp. supercomputer design center that also was set up in Austin.

“Obviously, we would have liked to have the project--there’s no question about that,” said Ken Gibson, director of the California Department of Commerce.

California’s $125-million proposal was a front runner until Tuesday, when Sematech directors meeting in Dallas voted unanimously for Texas’ offer of $68-million in incentives, mostly from the University of Texas.

“I’m deeply disappointed,” said Assemblyman John Vasconcellos (D-Santa Clara), who drafted legislation pledging up to $25 million a year for five years in direct financial aid and public improvements to lure the operation. A separate $125-million proposal was developed by Gov. Deukmejian.

Vasconcellos and other Democrats involved in wooing Sematech said there was a lack of cooperation with the Republican governor’s office and blamed Deukmejian for failing to take an aggressive leadership role in the project.

“I think the sign is clearly on the wall that California has to change its style in order to maintain the goose that laid the golden egg, which is our brain trust,” said Assemblyman Sam Farr (D-Carmel), chairman of the Assembly’s Economic Development and New Technologies Committee. “I think the governor needs to have a style that is less laissez faire” in going up against such competitors as Texas, which is unfettered by the sort of constitutional spending limits that California has, he said.

But Donna Lucas, a spokeswoman for the governor, said that “in putting our proposal forward we felt we left no stone unturned. It was a very competitive proposal.”

In a last-minute effort to enhance California’s prospects, Deukmejian on Tuesday said the state was prepared to provide its $125 million regardless of the level of federal matching funds.

Sen. John Garamendi (D-Walnut Grove), chairman of the Joint Committee on Science and Technology, called Sematech’s bypassing of San Jose “a tragic thing” that would hurt the state’s semiconductor industry.

“I think it’s a very serious problem for the state of California, and the impact is going to be significant and very long term,” Garamendi said. “I think we will eventually lose a large portion of our equipment manufacturers and suppliers. . . . Manufacturing follows research.”

But Gibson disputed that view.

“We would not at all see in any way that it will hurt our industry,” he said. “But there are 800 jobs that are going to be in Austin and not in the Silicon Valley,” he added.

Gene Conner, senior vice president of Sunnyvale-based Advanced Micro Devices, a member of the 13-company Sematech consortium, also argued that the selection of Austin would not harm Silicon Valley.

“The stronger we can make the industry, the better off all the geographic locales that contribute to the industry become,” he said.

The Sematech consortium includes such big high-tech companies as IBM, AT&T;, Digital Equipment, Hewlett-Packard, National Semiconductor and Intel. The public-private joint venture’s goal is to vastly improve the United States’ competitiveness in the semiconductor industry by developing new manufacturing processes and technologies for the tiny chips that are the brains of computers, sophisticated weapons systems, microwave ovens and a vast array of other items.