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Sumitomo Wrestling

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"That bothered us, yes," says Mike Phalen, planning and asset manager for the assets section of the Land Department. "But we went to work doing it, and got it done. [Preparing such a lease] is usually a six- to 18-month process, but we did it in about three months."

The state will hold an auction on the lease for the proposed site on December 12, but many view that auction as a mere formality.

Dave Krietor, director of the city's Community and Economic Development Council, says the incentives offered to Sumitomo-Sitix are appropriate. He downplays the $11 million property-tax break, contending it is necessary for Arizona to compete with other states that have less hostile business-property-tax structures.

"There still will be $2.5 [million] to $3 million in property taxes being collected there," he says. "The facility will still be one of the two or three biggest tax generators in [its] school district. Had we not had that [free-trade subzone] program available, they may not have located here."

Officials also have claimed the incentives are appropriate in light of the 700 jobs Sumitomo says it may eventually create with the project. Only 400 jobs are guaranteed for now.

Rimsza and Symington have publicly lauded the company on several occasions for creating high-paying jobs. But the bulk of Sumitomo's jobs will pay only about $23,000 per year--far less than the average wages at other Valley high-tech plants such as Motorola and Intel, according to spokespeople for those firms. Only about 50 of the first 400 employees, Sumitomo says, are expected to be higher-paid engineers. The rest mostly will be technicians and operators.

Sumitomo-Sitix is but one of more than 100 worldwide subsidiaries of Sumitomo Corporation, a gigantic, 400-year-old international trading company based in Osaka, Japan.

In the fiscal year that ended in May, Sumitomo earned 35.6billion yen, or about $352million, on revenue of 15trillion yen, or about $148.5 billion. Its businesses include chemicals, steel, copper, petroleum, precious metals, real estate, telecommunications, plastics, construction, insurance and banking concerns.

Sumitomo Bank is the world's largest, with about $625 billion in assets. It holds stakes in CB Commercial Real Estate Group, Goldman Sachs & Co. and many other financial companies.

Sumitomo Corporation's copper-mining division owns a 15 percent share in Phelps Dodge's Morenci copper mine in southeastern Arizona and is a 20 percent partner in a Phelps Dodge open-pit copper mine in Chile.

At its Phoenix plant, Sumitomo will melt silicon, add impurities to achieve certain electrical characteristics, and "grow" the substance into crystals. The crystals then will be sliced into wafers, machined flat, smoothed with chemicals and polished.

The wafers then will be either shipped to chip manufacturers (such as Motorola and Intel, two of the company's biggest customers) or put through another step--epitaxy, in which another silicon layer is grown on top of the polished wafer. A Sumitomo facility in Albuquerque handles epitaxial layering, and also "reclaims" scrap wafers by removing circuits from them.

Sumitomo has wafer plants in Fremont, California; Maineville, Ohio; and Saga, Imari and Amagasaki, Japan.

With a couple of exceptions at its Japanese plants, the company has a reputation for being "clean" by computer-industry standards and has a history of bringing benefits to the communities it locates in. It seems like the kind of corporate citizen any city would love.

So why, local critics ask, didn't Newberg, Oregon, want it?
After months of offers and counteroffers to Sumitomo from Newberg and Phoenix, the Oregon city retained several advantages--cheap land, a cool climate, nonstop flights to Japan, a well-educated labor pool and nearby customers.

There also was an enormous difference in land costs. Sumitomo could have purchased the entire 195-acre site in Newberg for $11million or less. That compares with leasing the 105-acre site in Phoenix for about $100million over 99 years, after which the land's use will revert to the state. And, although the city is giving the company $8million in off-site infrastructure, Sumitomo must pay up to $10 million for required rights of way and on-site improvements.

Even though it was cheaper in some ways, Newberg had some sizable disadvantages--no tax breaks, an organized and highly active environmental opposition, and, perhaps most important, a limited water supply.

Although the city is near both the Willamette and Columbia rivers, Newberg's water rights are limited. Sumitomo would have needed up to 25 percent of the city's total supply for the water-intensive manufacturing process of producing silicon wafers.

It may seem ironic that water concerns which, in large part, kept the company from building in the Pacific Northwest seemed to have played almost no part in the consideration of whether to put the same plant in the middle of a desert. Phoenix water officials say the plant will be able to draw as much water as it will ever need from the nearby Central Arizona Project canal.

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Dave Plank