Home Economy How Arizona is positioning itself for the $52 billion chip industry

How Arizona is positioning itself for the $52 billion chip industry

by SuperiorInvest

In recent weeks Gina RaimondSecretary of Commerce, spoke with Sen. Mark Kelly of Arizona, spent time with the president of Arizona State University, and appeared at a conference with the mayor of Phoenix.

Their discussion focused on one main topic: Crips.

Ms. Raimondo is in charge of doling out $52 billion in semiconductor manufacturing and research within the framework The CHIPS Act, a funding package designed to expand domestic production of essential technology that acts as the brains of computers. The legislation, which was approved in August, is a major part of President Biden’s industrial policy and part of an effort to secure America’s economic and technological leadership over China.

Arizona wants to make sure it’s in position for some of that a once-in-a-generation flurry of federal funding, to which the Commerce Department will begin accepting applications after Thursday. As a result, Arizona officials have flocked to Ms. Raimondo to promote the state’s growing chip industry, talking to the chief executives of giant chip companies such as Intel and Taiwan Semiconductor Manufacturing Company.

Arizona, which competes for subsidies along with Texas, New York and Ohio, may have a head start on the action. Home to semiconductor manufacturers since the 1940s, the state has 115 chip-related companies, while Ohio has one major manufacturer.

Arizona also leads the nation in chip investment as of 2020, announcing two new chip factories from TSMC and two other Intel factories that will cost a combined $60 billion. State leaders helped convince the companies to open the facilities by offering big tax breaks and grants for water and other infrastructure. They also promised to expand technical and engineering education in the state.

Government officials and chip companies also acted as a lobbying bloc in Washington. They helped craft the CHIPS Act to include federal tax credits, subsidies and grants for research and workforce. TSMC has expanded its lobbying staff from two to 19 people in two years, and Intel spent more than $7 million on lobbying last year, the most in two decades. Arizona State University spent $502,000 on lobbying last year, also the most in two decades.

“It was a deliberate and comprehensive effort,” said Sandra Watson, president of the Arizona Commerce Authority, an economic development nonprofit that helped spearhead the state’s efforts to attract chip companies and push the chip law. .

The Commerce Department is expected to start handing out $39 billion in subsidies to semiconductor makers soon, later opening the process for companies, universities and others to apply for $13.2 billion in research and workforce development grants. The CHIPS Act also provides an investment tax credit of up to 25 percent of a manufacturer’s investment costs.

Ms. Raimondo described the process as a “race” between states. “Every governor, every state legislature, every president of public universities in every state should be putting together their plan of attack right now,” she said in August during a visit to Arizona State University’s Technology Research and Development Center. “It will be a competitive process.

The Commerce Department declined to comment.

Arizona’s history with chip manufacturing dates back to 1949, when telecommunications hardware and services provider Motorola opened a lab in Phoenix that later developed transistors. In 1980, Intel built a semiconductor factory in Chandler, a suburb southeast of Phoenix, attracted by low state property taxes, relative proximity to its headquarters in Silicon Valley and stable geology. (Earthquakes are rare in Arizona.)

During the administration of President Donald J. Trump, he pushed the “America First” policy agenda. This opened up an opportunity for Doug Duceya Republican who was then governor of Arizona and other state officials to transform their economy into a technology hub.

In 2017, Mr. Ducey and other Arizona officials traveled to Taiwan to meet with executives at TSMC, the world’s largest maker of high-end chips. They touted the state’s low taxes, its business-friendly regulatory environment and Arizona State University’s 30,000-plus-student engineering school.

Mr. Ducey, who was close to Mr. Trump, also spoke with Commerce Secretary Wilbur Ross, Defense Secretary Mark Esper and Secretary of State Mike Pompeo about financial incentives to expand domestic chip manufacturing.

“My job is to sell Arizona,” Mr. Ducey said. “In this case, it was the sale of Arizona to TSMC, but also to management.”

In 2019, Mr. Ducey helped arrange talks between cabinet secretaries and TSMC executives to seal a deal to open manufacturing facilities in Arizona. The state has promised tax breaks and other financial incentives to help offset the company’s costs of moving production from Taiwan to the United States.

In May 2020, TSMC announced plans to build a $12 billion plant in Phoenix. Later that year, the city gave TSMC $200 million in infrastructure incentives, including water, sewer and roads. One traffic light would cost the city $500,000.

“TSMC appreciates the support from our dedicated partners at the state, local and federal levels,” said Rick Cassidy, CEO of TSMC Arizona, adding that CHIPS Act funds will allow the company and its suppliers to expand “for years to come.” .”

In early 2021 Pat Gelsinger, Intel’s CEO, announced a sweeping strategy to boost US chip production. States began to request the company. Arizona officials highlighted their long relationship with Intel and benefits such as low property and business taxes.

Intel soon announced a $20 billion expansion in Chandler with two additional factories that would bring 3,000 new jobs to the state. Chandler also approved $30 million in water and road improvements for the new plants.

“The Arizona government has been a great partner,” said Bruce Andrews, Intel’s chief government officer. “By investing early in semiconductors, they have created an ecosystem that has a multiplier effect on jobs and huge economic benefits.”

But some of the tax breaks have outraged Arizonans who say the moves have hurt public school funding. The state ranks 47th in per-student spending.

“We need to bring business to our state, but we have to look at the balance,” said Beth Lewis, executive director of Save Our Schools Arizona. “Corporations choose not to locate in Arizona because of our devastated public education system.”

Arizona continued to push Congress to create chip subsidy legislation. In March 2021, Senator Kelly joined Senators John Cornyn, R-Texas, and Mark Warner, D-Virginia, the authors of the legislation that would become the CHIPS Act, in challenging the new Biden administration to secure White House support. financing.

Mr. Kelly, the first sponsor of the CHIPS Act, became the chief negotiator of the legislation in Congress. He negotiated the inclusion of a four-year, 25 percent investment tax credit in the bill, including a provision that ensured Intel and TSMC would receive tax credits even if their Arizona factory projects were announced before the law took effect.

Mr. Kelly also helped Arizona State University President Michael Crow lobby to include more than $13 billion in grants for research and development and workforce training. And Mr. Kelly and state leaders hosted administration officials at events to showcase the state’s semiconductor efforts as part of the White House’s manufacturing strategy.

“We have the potential to become a leader in microchip manufacturing,” Kelly said in a statement. “It was an honor to lead this effort and I am now working to maximize it for Arizona”

Mr. Ducey, who left office when his term ended in January, has pushed for more tech-friendly policies, including income tax cuts. He also said he would use the $100 million the state received from federal Covid grants to attract more chip companies and help them apply for funding provided by the CHIPS Act.

In December, TSMC announced a second factory, bringing its total investment in Arizona to $40 billion. Mr. Biden and Ms. Raimondo traveled to Phoenix to speak at the announcement, with Mr. Kelly accompanying them on Air Force One.

Arizona officials continue to urge semiconductor companies to open factories in the state.

This month, Ms. Watson hosted more than 20 CEOs of chip companies at the Super Bowl in Glendale. Katie Hobbs, Arizona’s new governor and a Democrat, and Mr. Kelly touted how the state could benefit from the CHIPS Act.

“There is a robust pipeline,” Ms Watson said.

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