States sweeten their offers to chipmakers to outdo one other

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By Erika Bolstad,

HILLSBORO, Ore. — “Oregon’s been at this for decades,” the governor’s office assures potential investors in its so-called Silicon Forest. The Lone Star State’s governor calls it a “race that Texas must win for our state, our workforce, our national security, and our future.” And New York’s governor boasts on the state’s YouTube channel that it is the one to “lead America’s microchip resurgence.”

Since Congress passed the $52.7 billion CHIPS Act in 2022 to encourage domestic semiconductor manufacturing design and research, states have been competing to lure chipmakers. Semiconductors, known as chips, power nearly every aspect of life, and states want the investment and high-paying engineering and fabrication jobs that come with the industry. They’re sweetening the pot with their own tax credits and other enticements to encourage chip manufacturers to expand existing factories or build new manufacturing capacity. States also are helping chipmakers find and prepare factory sites, as well as developing new programs to educate and train necessary workers.

It’s all a part of President Joe Biden’s intention to return chip manufacturing to the Unites States to boost the long-term future of the industry as well as to make the country less reliant on volatile supply chains. Global chip shortages during the pandemic slowed the delivery of cars, video game consoles and even items like refrigerators.

Chips are the brains of most devices big and small, including laptops, automobiles and jet engines. They all rely on the tiny electronic devices to function, and they’re critical for future developments in artificial intelligence, biotechnology and clean energy. Yet none of the most advanced chips used in personal computers, smartphones and supercomputers are made at commercial scale in the U.S., according to the White House.

Much of the technology for the tiny electronic devices was invented here, but in recent decades, chipmaking moved overseas. Most semiconductors are currently made in Taiwan, which positions the industry amid the complex geopolitical rivalries between the U.S. and China.

Since the CHIPS Act was signed into law last year, companies have announced more than $166 billion private-sector domestic manufacturing investments, the White House said. In addition, 50 community colleges in 19 states have announced new or expanded programs to prepare workers for jobs designing and making chips in the new factories.

So far, the Commerce Department has received more than 460 statements of interest in new factories or chip-related education and training projects from 42 states, said Commerce Secretary Gina Raimondo, the former governor of Rhode Island. States have a critical role in working with private employers to access federal incentives, tax credits and other benefits of the CHIPS Act. Companies competing for the federal money must demonstrate they’ve collaborated with states to plan industrial facilities, workforce training and research centers.

Federal funding for most projects will range between 5% and 15% of total capital expenditures, the administration said. The fabrication factories where chips are made, known as “fabs,” are expensive production centers that take many years to build and can be difficult to site because of their massive footprint.

Making their pitch

States have been creative — and aggressive — in their collaborations with the industry, Ayodele Okeowo, a Commerce Department official leading state outreach for the CHIPS program, said during a seminar with the National Conference of State Legislatures this summer.

“This is a unique program and a new initiative,” Okeowo said. “We’ve never tried to catalyze our domestic semiconductor industry before. But that does not mean that states are waiting to see how this goes.”

States including New York and Ohio have offered large packages to attract manufacturers. In New York, Gov. Kathy Hochul, a Democrat, announced last year that Boise, Idaho-based Micron Technology would invest $100 billion over the next two decades to build what’s known as a “megafab.” State officials project it will lead to 50,000 jobs statewide, 9,000 of them directly from Micron with an average annual salary of over $100,000. The state in turn will provide $5.5 billion in tax credits over two phases over 20 years.

New York state will also invest $200 million in road and other infrastructure improvements surrounding the campus, and $100 million in other community benefits funding. The megafab will be approximately 2.4 million square feet, or the size of more than 40 football fields, the state said.

The competition among states is fierce. Hochul boasted that 50,000 chipmaking jobs were headed to Texas until New York convinced Micron, one of the world’s largest chipmakers, it could provide “the highly educated workforce that they need for them to succeed.”

“We told them this, we promised them this, and now we’ll deliver on this,” Hochul said in a speech several months ago. “And this whole state is going to benefit from this, creating this whole industry, building on the existing legacy businesses in the semiconductor manufacturing space.”

In Oregon, where its longtime semiconductor hub in the Portland suburbs is known as the Silicon Forest, many state officials were stunned last year to learn that Intel — Oregon’s largest private employer — planned a $20 billion manufacturing investment in Ohio. Intel pledged an additional $100 million in the Buckeye State toward partnerships with educational institutions “to build a pipeline of talent and bolster research programs in the region,” the company said.

Semiconductor workforce

California, Texas and Oregon have the most workers in semiconductors, but because Oregon has a smaller population and less diversified economy, it has greater dependence on the chip industry.

“It’s one thing to throw a lot of money at a project, but it’s another thing to be organized, to be intentional, to be simply just a great place to live,” said Janelle Bynum, a Democratic state representative in Oregon and former automotive engineer who sponsored legislation that eventually led to a $240 million state incentives pool to lure chipmakers with tax incentives, grants and other outlays.

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