We know the benefits of Sematech’s move to New York’s capital region. State officials say the consortium of microchip makers is bringing 100 high tech jobs when it relocates its headquarters from Austin, TX to the University at Albany.
New York is spending $20 million to attract Sematech. The company will invest $80 million into the move. Albany-Colonie Chamber of Commerce CEO Mark Eagan says the dream of a tech sector in New York is coming to a reality.
“This will be a magnet. Other tech companies will move here to be close to this global company. It’s a significant gain for New York,” Eagan said.
But there’s also a downside to having the company relocate to Albany according to Andrew Wheat, research director at Texans for Public Justice. Wheat was not happy to see Sematech leave Austin where the company was headquartered since 1988.
Here are five reasons why he says New Yorkers should be concerned:
1. Sematech could also leave New York -- New York is luring Sematech with a $20 million incentive. Austin was one of many cities that competed for Sematech in 1988. Nothing will stop the company from going to another state that offers more public money in the future.
2. The deal is not worth it for New York -- Are the 100 new jobs worth the $20 million in taxpayer dollars? If you do the math, that works out to be about $200,000 per job.
3. Sematech is not worth luring -- There was a time when Sematech did a lot for Austin. They were the catalysts for the development of the chip industry. Their relevance was wearing out in Texas because the jobs were going away. According to Statesman.com, the manufacturing jobs Sematech helped create in Austin have moved to Asian countries.
4. Sematech allegedly broke a contract -- Texas gave Sematech $40 million as part of an agreement in 2004 to keep 400 jobs in Texas. As of May 2010, the company had less than 150 employees in Austin. In addition, Statesman.com is reporting that Sematech was not supposed to be negotiating with any other location according to the details of the contract. The paper says Texas could require the company to repay the money.
5. Corporate welfare -- Texans for Public Justice says the deal to lure Sematech is an example of corporate welfare where private industry creates bidding wars between different states. The real losers are often the taxpayers.
Bob Ward, deputy director at The Rockefeller Institute says in general when companies are lured with cash incentives, the big question always comes down to the cost benefit.
Eagan says there’s a lesson in all of this. New York shouldn’t take Sematech for granted. This is a competitive world and Sematech can move somewhere else if it gets a better deal. He says that’s just business.
Sematech will begin its move from Austin, TX in January 2011. Despite several phone calls and e-mails, the company could not be reached for comment on this post.
