Press release: Mosel Vitelic: why not?

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Added on 18 October 2000 in Press releases

Mosel Vitelic: why not?

Normand Legault, president, Board of Trade of Metropolitan Montreal

Montreal, October 18, 2000 – The proposed investment by the Taiwanese company Mosel Vitelic, in partnership with the Société générale de financement, has provoked heated public debate. A number of Canadian newspapers, including The Gazette, are fanning the flames. The Gazette is vehemently opposed to the proposal, which calls for significant government investment. There is no unanimous agreement on the project in the Greater Montreal business community, but we feel that we speak for businesspeople when we say "Mosel Vitelic? Why not?"

Mosel Vitelic manufactures electronic components, printed circuit boards, semiconductors and microprocessors, used not only in computers today but also in the hybrid telephones of the future that will provide Internet access. The company is proposing a plant in Montreal to manufacture large-scale integration,* high-density chips, mainly for use in systems that will be in peak demand by 2004 or 2005.

For years now, studies and plans by the various levels of government and economic promotion agencies in the Montreal region have emphasized the importance of attracting a large, world-class manufacturer to produce this kind of components. It is seen as a valuable structural asset for a high-tech city boasting diversified information and telecommunications technologies, two converging technological worlds.

Moreover, the Mosel Vitelic project alone promises to create thousands of information-technology jobs, including-according to the promoters-several hundred high-level positions.

On this basis, even though the first phase of the project mainly involves jobs in a relatively traditional technological field, everything argues in favour of this investment. The business community can only be delighted at the prospect of diversification in an economic sector that already has a significant industrial nucleus, with the presence of leaders in consulting and multimedia and such good local companies as Matrox, Eicon and C-Mac.

The real question, however, has more to do with the amount of public investment necessary to make this investment a reality.

In this connection, it is perhaps the proportion of public funds to be injected in the project that raises the most questions. It is a fact of life that governments contribute through tax incentives, or sometimes through loans at preferential interest rates or R&D funding, to attracting large high-tech firms.

New York State, you will remember, just announced a contribution of close to $1 billion to IBM, mainly in the form of a tax holiday, to allow it to erect a major electronic circuit plant near Albany.

Businesspeople are not very keen on government intervention. But it must be acknowledged that such intervention, despite the tighter rules introduced by the World Trade Organization, remains a common practice-especially when it comes to attracting technological investment.

Where Mosel Vitelic is concerned, there is some doubt as to the real potential of the investment. The technological sector involved is constantly changing and products rapidly become obsolete. Moreover, this company is in the second quintile of high-tech companies in the circuit, processor and semi-conductor industry, the seventh-largest in the world in its field. We are not talking about IBM, Motorola or Intel.

Finally, while this appears to be a dynamic and financially healthy company, some of its previous projects have not been as successful as it would have liked.

In other words, the SGF's 47% equity stake in the new company, and the tax benefits currently guaranteed by the Quebec government, as well as the federal contribution through the Technology Partnerships Canada program, represent a real business risk.

We hope that the company will demonstrate its own interest, by investing substantially in the project itself.

Nonetheless, since this project was sought, identified and promoted by the governments themselves, and the federal government in particular, and was courted through systematic efforts by investment prospecting organizations such as Montreal International, it would be ill-advised to pull out now.

The Board simply hopes that the SGF has sufficient expertise to evaluate the technical quality of the information on which it plans to base its first major partnership outside the more conventional areas in which it has traditionally concentrated.

There is a business risk in any investment, be it in a conventional sector or in information technologies or other related technologies. Since the Quebec government has already supported investments in major projects aimed at creating jobs and improving the province's economic structure, and since it has given the SGF the means to become a partner in major projects, why shouldn't it also invest in the Mosel Vitelic project? This one certainly offers better prospects than a high-tech entertainment park!

The Board of Trade of Metropolitan Montreal has more than 7 000 members. Its mission is to be the leading group representing the interests of the Greater Montreal business community.  The objectives are to maintain, at all times, relevance to its membership, credibility towards the public and influence towards government and decision-makers.