Mosel Vitelic project essential to the Québec and Canadian economies
Montréal, August 28, 2000 – Claude Blanchet, Chairman, President and CEO of SGF (Société générale de financement du Québec), and Pierre Laflamme, President of SGF Tech, met with the media today to discuss the main economic benefits represented by the construction of a manufacturing plant in St. Anne de Bellevue by Mosel Vitelic, a Taiwanese producer of semi-conductors.
The semi-conductor sector is booming. Worldwide, the market is already worth $185 billion US and could grow by as much as 30% per year for the next three years. The trend is for companies in this sector to work more closely together, forming high-tech clusters. There are currently 35 such clusters throughout the world, in the U.S., Asia, Europe and Japan.
Canada is the only G‑7 country without a major semi‑conductor plant. Such a facility would bring economic benefits not only to Québec, but to other parts of Canada as well, mainly in Ontario. Canada and Québec now have a unique opportunity to join forces to bring home a project that would have long‑term benefits for job creation and high technology development in this country.
Even though Québec and Canada boast a number of high‑calibre companies in the electronics industry production chain and in the field of telecommunications networks, they are still missing an indispensable link: semi-conductor production. It was this lack that led Industry Canada to adopt a policy, in March 1996, to attract investment in the semi-conductor sector. In the thick of federal government efforts to attract Mosel Vitelic, a dozen Canadian cities joined the race. Last May, Mosel Vitelic gave the nod to St. Anne de Bellevue.
An electronic circuit manufacturer such as Mosel Vitelic will attract other leading‑edge industries to Québec, through technology transfer and development. It’s a phenomenon that has occurred around the world. In Taiwan, Scotland, Oregon and Texas, the presence of a semi‑conductor manufacturer has led to the creation or rapid development of several hundred companies in the computer, telecommunications, opto‑electronics, machinery and precision equipment sectors.
To ensure its position in the global electronics industry, Québec has to focus its efforts on attracting semi-conductor production –a basic strategic sector. Existing suppliers to the semi‑conductor industry would then have a unique opportunity to expand their businesses, both quantitatively and qualitatively. As well, Mosel Vitelic would attract new, world‑class suppliers to Québec.
Financing: an investment, not an expense
For a project like this one to be successful, it needs adequate financing and initiatives that encourage profitability and competitiveness.
The project’s construction and start-up costs require an investment of $2.1 billion US.
The SGF and Mosel are prepared to invest $700 million in equity. The second $700 million will be provided by a bank loan. Finally, the third $700 million will come from cash flows generated by the project itself.
According to experts and other similar situations, the bank loan requires government guarantees of over 50%.
The same experts say that without such a guarantee, the bank loan could not exceed $350 million. This would require a further contribution of $350 million from existing federal government programs.
In terms of profitability, in addition to the other advantages being offered by Québec, the St. Anne de Bellevue site would benefit from the various initiatives announced by the Québec government in its most recent budget to support large‑scale projects such as this one.
The financial contribution from the two levels of government will generate direct benefits of some $6.7 billion over 10 years: $4 billion for Québec via SGF earnings and $2.7 billion for the Canadian government.
The semi‑conductor sector
Because they lie at the heart of information and telecommunications technologies, semi-conductors form the very foundation of global industrial development in the 21st century. In 1998, clients of semi-conductor producers –manufacturers of computers, communications systems, industrial production equipment and automobiles– as well as the military electronics systems sector, constituted a market worth $931 billion.
Increasingly, the leading integrators (IBM Hitachi, Motorola, Nortel, etc.) are getting out of manufacturing and, instead, are outsourcing these operations to more efficient, specialized manufacturers. The growth of the industry in Taiwan is a case in point.
“We are at a major turning point in the history of industrial development in Québec,” concluded Mr. Blanchet. “Given the state of international competition, we don’t have much time left to decide whether we’ll be among the leading regions in industrial development in the 21st century.”
Vice-President, Communications and Public Relations
Société générale de financement du Québec