Attracting Semi-Conductor Plant Investment to Toronto

The Economic Development Committee recommends the adoption of the following report (September 29, 1998) from the Commissioner of Economic Development, Culture and Tourism subject to Recommendation (2) being amended to include the words "on phasing and funding" after the word "reports", so as to read:

"(2)staff from the Economic Development Division provide further status reports on phasing and funding in a timely manner on the progress of this project;":

Purpose:

The purpose of this report is to initiate a strategy to attract semiconductor plant investment to the City of Toronto through the structuring of a local partnership to combine the resources and efforts of a number of interested organizations on this initiative.

Funding Sources, Financial Implications and Impact Statement:

Costs associated with this project will be compensated through partnerships with other levels of government, private sector and business associations. The City's contribution will include Economic Development Division staff time, marketing materials and a portion of the costs of any research/data deemed to be beneficial to the city. This is a long-term project and funds will be derived from both current and future operating budgets of the Economic Development Division.

Recommendations:

It is recommended that:

(1)staff from the Economic Development Division initiate and participate in the creation of a Toronto Semiconductor Partnership which will explore the opportunity to attract semiconductor plant facility investment to Toronto;

(2)staff from the Economic Development Division provide further status reports in a timely manner on the progress of this project; and

(3)the appropriate City Officials be authorized and directed to take the necessary action to give effect thereto.

Background:

The Mayor's Office and staff from the Economic Development Division received a presentation from the Federal Semiconductor Working Group led by Investment Partnerships Canada (Industry Canada/Department of Foreign Affairs and International Trade - DFAIT) outlining the opportunity to locate a semiconductor manufacturing facility in Toronto. North Etobicoke MP Roy Cullen coordinated the presentation, which included representatives from the Ontario Government, Humber College and the development community. In addition, MPP John Hastings, and Toronto Councillors Elizabeth Brown and Bruce Sinclair have been actively involved in this initiative and were represented at the meeting.

A semi-conductor plant, commonly referred to as a "Fab" facility, manufactures computer chips. At the last roundtable discussion of the Federal Semiconductor Working Group, the federal government estimated that the world-wide semiconductor market will represent US$376 billion by the year 2002 and that this demand will fuel the requirement for more than 100 new and refurbished fabrication plants over this period. Of these, it is anticipated that some 27 new facilities will be located in North America and that each of these plants will require an investment of US$500 million to US$2.4 billion. Fabs create significant benefits, including attracting skilled labour, contributing to the municipal, provincial and federal tax base, creating an average of 800 to 2000 jobs per facility with the supplier chains and supporting industry creating an additional two to three indirect jobs for each permanent fab job. These facilities consume a significant amount of electrical power and water and demand a well established, modern and complete infrastructure and an educated work force.

Recently the computer chip industry has experienced a downturn in its growth and production with the closure of some older fab facilities, however forecasts predict that the current situation will turn around in the latter part of 1998 and beginning of 1999. This slowdown affords Toronto with an opportunity to compete in this market by taking such necessary actions as producing comprehensive investment profiles in anticipation of the next growth cycle.

The Ontario Jockey Club (OJC) site is located at the northwest corner of the Woodbine Racetrack property, bounded by Highway 427 and Rexdale Boulevard. The OJC retained the services of Industrial Design Corporation (IDC) of Portland, Oregon, to evaluate this location as to its suitability for semiconductor manufacturing. IDC's investigation was very positive with no potential flaws identified.

Within Toronto, only the OJC site has been investigated to date. There is an outstanding need to identify and evaluate further sites within Toronto as to their suitability for this type of development. Many of the regions and cities participating with Investment Partnerships Canada have identified a number of sites with potential for this type of facility; Ottawa, for example, has four sites identified.

The process of attracting a fab facility can take several years, therefore land owners typically investigate other opportunities for their property concurrently. The OJC has indicated that they are enthusiastic about the potential of locating a fab facility on their lands and will actively participate in securing this investment, however they will also continue to consider other opportunities should they materialize.

Comments:

Investment Partnerships Canada is a joint initiative of Industry Canada and DFAIT with staff dedicated to coordinating the attraction of semiconductor investments into Canada. Currently there are seven municipalities actively pursuing this type of investment; these include: Calgary, Edmonton, Burlington, Ottawa, Montreal, Vancouver and Winnipeg. The five provinces in which these cities are located also provide staff and political support to these efforts. Research is provided to the group through the National Research Council and the Communications Research Centre. In addition, there are seventeen Canadian Embassy posts actively involved in communicating with investors in their respective countries and who report regularly to the group. In June and August of 1997 potential investors visited Canada; this visit involved 325 people with 19 meetings, site visits and significant logistic support (eg. helicopter fly-overs, etc.).

It is anticipated that, in order for a municipality to be prepared and have a comprehensive profile ready to respond to a future investment prospect, an investment in the order of $400,000.00 will be required. This investment can be broken down into labour/staff time (2 FTEs), commissioning of specialized studies (e.g. soil, vibration and hydro), preparation of investment profiles, study tours, site visits, partnership meetings and costs associated with the participation of Mayor and Members of Council with investment leads.

These costs will not all be born by the City; rather there is a need to develop a team or partnership to cost share in this initiative. This project's success hinges on a committed partnership being established in the community. A regional semiconductor investment profile is one of the most extensive and comprehensive data sets a community will ever require and, therefore, represents a good investment in research which has broader application for future investment inquiries.

A working group will be structured to undertake this initiative and will include political representatives, university and college representatives, provincial and federal government officials, economic development professionals, utility companies (ie., hydro, water, gas) the Greater Toronto Marketing Alliance, the GTA Economic Development Partnership, relevant business associations such as SMART Toronto, Connect IT and the Toronto Technology Network and private sector representatives including development industry interests.

Toronto has many major advantages which have been reviewed by the federal government in their Toronto Census Metropolitan Area (CMA) Report. This prospectus highlights the breadth and depth of the capability in semiconductors that currently exists within the Toronto CMA and its strong links to the electronics market. This capability is founded on Toronto's technological strengths, its specialized services and support for the electronics industry, its R&D resources, the availability of skilled labour, the strength of existing business networks and the regional infrastructure in place to support the sector. A copy has not been included in this report, however after review one would conclude that the Toronto CMA represents a huge opportunity for potential semiconductor investment.

This project will yield number of spin-off benefits which have been experienced in other regions to date. The City will create a comprehensive community profile which can be used to attract investment in other industries. The partnership developed in this process can, and will, form the nucleus for future investment attraction efforts and most importantly it sends a clear signal that Toronto is "open for business".

Conclusions:

This report recommends a process for the City of Toronto to take a proactive role in securing a future investment in semiconductor fabrication facilities. In order for this initiative to be successful, it is necessary that the Economic Development Division take a lead role in forming a coalition of local public sector and business interests through the formation of a Toronto Semiconductor Partnership. Along with the significant benefits which will be afforded to the City's economy through the securing of this type of investment, the process itself will yield a comprehensive investment profile which will have application to other future investment inquiries in other industry sectors.

Contact Names:

Rick Field, Economic DevelopmentTel.:394-8237Fax: 394-5537

Christine Raissis, Director, Economic Research & Bus. Info.Tel.:392-3385Fax: 395-5332

Brenda Librecz, Managing Director, Economic DevelopmentTel.:397-4700Fax: 395-0906

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The Economic Development Committee reports, for the information of Council, having received an overhead presentation from Mr. Bruce Graham, Director, Business Developments and Retention, Economic Development, in connection with the foregoing matter.

The following persons also appeared before the Committee in connection with the foregoing matter:

-Mr. James Holloway, Senior Account Executive, Investments Partnerships Canada, Industry Canada;

-Mr. Saad Rafi, Director, Investment Branch, Investment Division, Ministry of Economic Development, Trade and Tourism, Government of Ontario; and

-Councillor Elizabeth Brown, Rexdale Thistletown.

(A copy of the aforementioned presentation is on file in the office of the City Clerk.)