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

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

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

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Over the past few weeks, Gina Raimondo, the Secretary of Commerce, has spoken with Senator Mark Kelly of Arizona, spent time with the president of Arizona State University, and participated in a conference with the mayor. of Phoenix.

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Their discussions focused on one main topic: crisps.

Ms. Raimondo is responsible for doling out $52 billion for semiconductor manufacturing and research under the CHIPS Act, a funding program to expand domestic production of the fundamental technology, which acts as the brains of computers . The legislation, which was passed in August, is a key 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 this single source of federal funding, for which the Commerce Department should begin accepting applications within days. As a result, Arizona officials swamped Ms. Raimondo to promote the state’s growing chip industry and spoke with chief executives of giant chip companies such as Intel and Taiwan Semiconductor Manufacturing Company.

Arizona, which is vying for grants with Texas, New York and Ohio, could have a head start on the action. The state has been home to semiconductor manufacturers since the 1940s and has 115 chip-related companies, while there is one large manufacturer in Ohio.

Arizona has also led the nation in chip investment since 2020, with the announcement of two new chip factories by TSMC and two additional factories by Intel that will cost a total of $60 billion. . Heads of state had helped persuade companies to open the facilities by offering major tax breaks and subsidies for water and other infrastructure. They also promised to expand technical and engineering education in the state.

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

“It was an intentional and on-deck effort,” said Sandra Watson, president of the Arizona Commerce Authority, a nonprofit economic development organization that has helped lead the state’s efforts to attract corporations. chips and lobbying for the CHIPS law. .

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

Ms Raimondo described the process as a “race” between states. “Every governor, every state legislature, every president of public universities in every state should now come up with their plan of attack,” she said in August during a visit to the research and technology development center. from Arizona State University. “It’s going to 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 plant in Chandler, a suburb southeast of Phoenix, attracted by the state’s low property taxes, relative proximity to its Silicon Valley headquarters, and stable geology. (Earthquakes are rare in Arizona.)

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

In 2017, Ducey and other Arizona officials traveled to Taiwan to meet with executives from TSMC, the world’s largest maker of advanced chips. They promoted the state’s low taxes, business-friendly regulatory environment, and Arizona State University’s school of engineering, which has more than 30,000 students.

Mr Ducey, who was close to Mr Trump, also had calls with Commerce Secretary Wilbur Ross, Defense Secretary Mark Esper and Secretary of State Mike Pompeo over financial incentives to expand domestic production of fleas.

“My job is to sell Arizona,” Ducey said. “In this case, it was about selling Arizona to TSMC but also to the administration.”

In 2019, Ducey helped organize calls between cabinet secretaries and TSMC executives to strike a deal to open manufacturing plants in Arizona. The state has promised tax credits and other financial incentives to help offset the costs of moving production from Taiwan to the United States.

In May 2020, TSMC announced plans to build a $12 billion factory in Phoenix. Later that year, the city provided TSMC with $200 million in infrastructure incentives, including water pipes, sewers, and roads. A traffic light would cost the city $500,000.

“TSMC appreciates the support of our dedicated partners at the state, local and federal levels,” said Rick Cassidy, general manager of TSMC Arizona, adding that the CHIPS Act funds will enable the company and its suppliers to grow.” for the coming years”. .”

In early 2021, Pat Gelsinger, Intel’s chief executive, announced a radical strategy to increase chip production in the United States. States began soliciting the company. Arizona officials pointed to its long relationship with Intel and its benefits, such as low state property and business taxes.

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

“The Arizona government has been a great collaborator,” said Bruce Andrews, Intel’s director of government affairs. “By investing early in semiconductors, they created an ecosystem that had a massive job multiplier effect and economic benefits.”

But some of the tax breaks have angered Arizona residents, who say the measures have hurt funding for public schools. The state ranks 47th in spending per student.

“We have to bring business to our state, but we have to strike a balance,” said Beth Lewis, executive director of Save Our Schools in Arizona. “Companies are choosing not to locate in Arizona because of our devastated public education system.”

Arizona continued to push Congress to create flea subsidy legislation. In March 2021, Senator Kelly joined Senators John Cornyn, Republican of Texas, and Mark Warner, Democrat of Virginia, the authors of the legislation that would become the CHIPS Act, on a call with the new Biden administration to lobby for White House funding support.

Mr. Kelly, an early sponsor of the CHIPS Act, became the legislation’s chief negotiator in Congress. He negotiated the inclusion of a four-year, 25% investment tax credit in the bill, including a provision ensuring that Intel and TSMC would get the tax credits even if their plans plant in Arizona were advertised before the bill took effect.

Kelly has also helped Arizona State University President Michael Crow lobby for the inclusion of more than $13 billion in grants for research and development and workforce training. . And Mr. Kelly and state leaders have 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 lead the country in microchip production,” Kelly said in a statement. “I was honored to lead this effort, and now I’m working to maximize it for Arizona.”

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

In December, TSMC announced a second factory that would bring 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 push semiconductor companies to open factories in the state.

This month, Ms. Watson hosted more than 20 chip company CEOs at the Super Bowl in Glendale. New Arizona Governor and Democrat Katie Hobbs and Mr. Kelly announced how the state could benefit from the CHIPS Act.

“There’s a strong pipeline,” Ms Watson said.

Tech

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