Oregon courts mysterious 'Project Azalea,' said to be a massive chip factory

Apple_A6.jpg Samsung currently makes Apple's processors in Texas.

Even as state officials work to lock in Nike's expansion, they're quietly trying to land another project that might be even larger.

Business Oregon -- the state's economic development agency -- confirms that it's recruiting a company that goes by the codename "Azalea." The department declined to discuss details of the effort, citing a nondisclosure agreement with the unnamed company.

However, officials in New York have been actively pursuing what's known there as "Project Azalea."

, an Albany, N.Y., weekly, describe that project as a 3.2-million-square-foot semiconductor factory that would employ at least 1,000 people.

The cost of building and equipping a new semiconductor factory -- a fab, in the chip industry's parlance -- runs in the billions of dollars. That's attracted great interest to the chatter around Azalea, which at this point is largely speculative.

Within the chip industry, the theory is that the fab would be a contract facility to build microprocessors for Apple's mobile devices, the iPhone and iPad.

People familiar with the state's business recruitment efforts believe that Oregon and New York are competing for the same project, according to a person with knowledge of Azalea but not authorized to speak about it. Talk of Azalea emerged in the halls of the state Capitol in Salem last week, as lawmakers were preparing

.

While the sportswear giant has pledged to add at least 500 jobs and invest $150 million if it receives certain tax assurances, Oregon could be a long shot for Azalea.

Trade journal

that the consulting firm Deloitte Touche Tohmatsu has also looked at sites in California and Texas on behalf of Project Azalea.

EETimes also has identified Taiwan Semiconductor Manufacturing Co. as the likely manufacturer behind Project Azalea. TSMC already has an older fab, WaferTech, in Camas, Wash., and has room to expand at the site. But there's no evidence Project Azalea is looking there, and economic development officials in southwest Washington said Tuesday that they'd heard nothing about it.

. But several reports have suggested that Apple wants to be less reliant on Samsung, which makes rival devices running on Google's Android mobile operating system. Apple and Samsung have been engaged in an intense legal dispute over patents on their mobile technology.

If Project Azalea were to choose Oregon, it could tap into a vibrant chip industry anchored by Intel. Depending on the nature and scale of the project, Azalea might consider sites in Gresham, Washington County or at the shuttered Hynix Semiconductor factory in Eugene.

While Oregon's chip ecosystem is well established, New York has been working to grow its own -- and has spent lavishly to that end.

The state committed $2 billion in incentives to recruit contract manufacturer GlobalFoundries, which opened a factory earlier this year in Malta, a community in upstate New York.

And last year, the state committed to invest $400 million in the SUNY College for Nanoscale and Science Engineering as part of an agreement to bring a $4.4 billion project to Albany for piloting larger silicon wafers for the next generation of semiconductor manufacturing.

Oregon also has large property tax incentives at its disposal for business recruitment -- Washington County values Intel's current package of property tax exemptions at more than $500 million. But Oregon industry insiders say that the state's incentives can't compare with what New York -- which has a much larger state budget and overall economy -- can offer.

"They pulled out all the stops in Albany on incentives," said Bob Goforth, of the site-location firm Leak-Goforth, which serves the chip industry from offices in North Carolina and Florida.

Still, Goforth said that Oregon's established semiconductor industry, which includes abundant suppliers, power and water, remains an appealing draw for chip manufacturers.

"Of course, Oregon has a well-developed situation," Goforth said. "In my opinion, I think the Oregon business climate is better than New York's business climate."

-- Mike Rogoway; Twitter: @rogoway; phone: 503-294-7699

--Christian Gaston; @christiangaston

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