AST FISHKILL, N.Y., July 31 — I.B.M. opened a sprawling and sophisticated new semiconductor factory here today that cost more than $2.5 billion to build and equip, the largest single capital investment the company has ever made.
The factory, which opens as the computer chip business is in a slump, is a costly and risky move for I.B.M. But it is also an expression of confidence by the company that it can remain a technology leader in the highly competitive global semiconductor industry, and a commitment that the best place to execute that strategy is in the Hudson River Valley of New York.
I.B.M. is an exception among computer makers in that it still invests heavily in research to advance the design, manufacture and materials used in semiconductor chips. It is spending more than $500 million a year on semiconductor research and development.
The factory will produce a wide range of specialized semiconductors used in everything from the largest mainframe computers to cellphones and video-game consoles.
The new plant is part of I.B.M.'s push to gain a strong lead in chip making beyond the personal computer business, where Intel and East Asian chip producers hold the advantage.
"The core of our strategy is to lead in technology and attack the high-performance segments of the market," said John Kelly, senior vice president in change of I.B.M.'s technology group.
An advantage to having the semiconductor fabricating factory here, some 60 miles north of Manhattan, Mr. Kelly explained, is that it is situated very close to its research laboratories in nearby Westchester County. To stay ahead in advanced chip technology, he said, moving innovations out of the labs and into the factory as fast as possible is crucial.
"What we call the lab-to-fab time should be as close to zero as possible," Mr. Kelly said. "If our strategy were anything but to be on the leading edge, we'd have put the plant in Asia."
The new factory, which will begin normal production early next year, will employ about 1,000 people. In remarks during a ribbon-cutting ceremony today, Gov. George E. Pataki said he also expected the installation to generate thousands of additional jobs in the Hudson Valley area for contractors and suppliers catering to the factory. He praised I.B.M. for being "a critical partner in our economic development efforts" in New York State.
In a brief speech, Samuel J. Palmisano, I.B.M.'s chief executive, emphasized that it was important to make long-term investments despite the current slump in the technology business. "To play to win in technology, you innovate and you lead," he said.
But manufacturing technology products is a costly and cyclical business. In June, I.B.M. announced that it was taking a charge of more than $2 billion against earnings. The biggest reasons were the cost of getting out of the business of manufacturing hard disks for storage, which it sold to Hitachi, and shutting down some of its older semiconductor operations.
Mr. Kelly said that the demand for advanced chips, like those produced at I.B.M.'s installation in Burlington, Vt., is strong. "I need more capacity in that end of the market," he said, "and this is factory is critical to meeting that growing demand."
If I.B.M. has miscalculated the demand, it will suffer badly as both the high operating costs and depreciation on the huge capital investment for the East Fishkill factory drag down earnings.
But industry analysts said that the plant is likely to be insulated from a fall-off in one or a few segments of the semiconductor market. It is highly automated and designed to shift flexibly to produce many different kinds of chips to suit demand. "The diversity is the big difference with this plant," said Richard Doherty, president of Envisioneering, a research firm. "It gives I.B.M. the capability to make so many different kinds of custom chips, and the world is going to custom chips."
The 140,000-square-foot plant is a testament to advanced manufacturing technology. The 300-millimeter silicon wafers — about the size of a regular pizza — are shuttled around in enclosed plastic pods, which ride on overhead tracks. They drop down from wires automatically into machines, sheathed in stainless steel and glass, for each stage of processing and fabrication.
Throughout the 500 processing steps, which typically last 20 days, the wafers are not touched by human hands. The circuits etched into the chips are less than one-thousandth the width of a human hair.
Human operators are there to monitor the systems, catch errors and fine-tune the production process for greatest efficiency. Because each of the hundreds of processing machines is self-enclosed, and essentially airtight, the uniforms that operators wear are less constricting than in the previous generation of chip plants, where they looked like space suits.
The operators at the East Fishkill factory wear light nylon uniforms, light blue shoe covering and translucent hairnets made of paper. They look more like workers in a bakery.
Yes, said Richard Brilla, director of the new plant, "but the doughnuts are a lot more costly here." Each wafer, holding hundreds of chips, is worth $6,000 to $10,000 apiece, depending on what insulation, circuitry and materials are used.
