Cities bustle in vision of US computer chip boom

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Cities bustle in vision of US computer chip boom

Taylor, Texas – A shortage of computer chips has rattled energy from the global economy, penalized industries such as automakers and medical device makers and contributed to fears about high inflation.

But several US states and cities are beginning to see a glimmer of hope: the prospect that efforts to rapidly increase chip production in the United States will lead to a busy chip factory in their backyard. And they’re running to get a piece of the potential upside.

One of those cities is Taylor, a Texas town with a population of about 17,000, a 40-minute drive northeast of Austin. The leaders here are pulling out all the stops to get the $17 billion Samsung plant the company plans to build in the United States early next year.

The city, its school district and county plan to offer Samsung hundreds of millions of dollars in financial incentives, including tax exemptions. The community has also arranged for the piping of water from the adjacent county to be used by the plant.

But Taylor is not alone. Officials in Genesee County in Arizona and New York are also trying to woo the company. So, too, are politicians in nearby Travis County, home of Austin, where Samsung already has a plant. Samsung said in a filing that locations in all three states “offered strong property tax exemptions” and offered funds to build infrastructure for the plant. Congress is considering whether to offer its subsidies to chip makers manufactured in the United States.

No one has any idea where Samsung’s plant will land. The company says it is still weighing where to put it. The decision is expected to be announced any day.

The federal government has urged companies such as Samsung, one of the world’s largest manufacturers of high-tech components, to build new plants in the United States, calling it an economic and national security imperative. Intel worked on two plants in Arizona in September and may announce the location for a planned manufacturing complex by the end of the year.

It could just be a warm-up act. The Senate this year passed a bill to provide $52 billion in subsidies to chip makers, a plan backed by the Biden administration that would be Washington’s biggest investment in industrial policy in decades. The House has not considered it yet. The nine governors said in a letter to congressional leaders that the funding would “provide a new, powerful tool in our states’ economic development toolbox.”

The prospect of Samsung coming to Taylor is also raising hope. Business owners say it will bring more patrons to the local brewery and the quieter city. Parents think the factory’s state-of-the-art assembly line will inspire the city’s high school students. A real estate agent said residents believe land prices will rise sharply – values ​​have already gone up in recent months.

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“Something like this might be a shot in the arm,” said Ian Davis, chief executive of Texas Beer Company, which opened a taproom in downtown Taylor five years ago.

The vast majority of semiconductors — an industry that generated nearly $450 billion in revenue in 2020 — are made in Taiwan, South Korea and mainland China. The United States controls just 12 percent of global production.

Lawmakers say the chip shortage shows how America’s limited role in the industry puts the country’s economy in a precarious position. Politicians also fear that China is taking steps to increase its control over global semiconductor supplies, potentially leaving the United States at a technological disadvantage against a geopolitical rival that would have national security implications.

But efforts to lure plants to cities are raising questions about how far communities must go to get a piece of the high-tech economy – and how much money taxpayers should pay.

Chandler, Ariz., approved up to $30 million in water and road improvements to support the ground-breaking Intel plant in September. Phoenix will spend about $200 million on infrastructure for a new factory by Taiwan Semiconductor Manufacturing Company, another major chip maker. When the company announced the plant in 2020, it said the subsidy was key to its plans.

Critics of corporate tax incentives say the money could be better spent on infrastructure and public schools. They say cities may be spending taxpayers’ funds unnecessarily, as factors such as the availability of talent and natural resources are more important to chip makers than subsidies. And he argues that cities sacrifice the most important thing a major industrial project can contribute: tax revenue.

“There are clearly benefits,” said Professor Nathan Jensen of the University of Texas at Austin, who studies subsidy programs. “The problem is if you’re paying literally a lot of profit to get the company off the ground.”

Many of Taylor’s residents said that was the price they had to pay to supercharge the city’s revival.

Taylor – named for a railroad executive – was once a center for the shipping of cattle and cotton. Louie Muller Barbecue opened in 1949 and still attracts carnivores with its brisket and beef ribs.

But in recent decades, residents said, the town of Taylor has lost some vitality.

They have tried to change this by attracting new small businesses to the city and renovating an old building that now houses Mr. Davis’ taproom, converted loft and a coffee shop that serves baba and chocolate-tahini brownies. Another group renovated the city’s old high school to house small businesses, including restaurants and a pinball bar. The city spawned a downtown park.

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“By bringing in this, something that’s going to happen indefinitely, the revenue it brings to our city and our schools is going to be enormous,” said Taylor resident Susan Green.

Austin Mayor Steve Adler said the subsidies Austin gave to Samsung in the 1990s had a positive impact on the city, which has seen rapid growth in recent years. Tesla and Oracle recently moved their corporate headquarters to Austin, and Facebook and Apple have major operations there. By one estimate, the city is the country’s top site for commercial real estate investment.

Austin and its surrounding counties have held their talks with Samsung about the company’s planned new factory. Mr. Adler said he wanted the city to be a competitive site for the Samsung plant.

Mr. Adler said of Samsung, “It has certainly brought great benefits to our city and our region.” But Pat Garofalo, director of state and local policy for the American Economic Freedom Project, an eclectic group critical of big tech companies, said the money would be better spent on projects that would make a city attractive to a wide range of businesses. form – such as public schools – rather than a single suitor.

He added that manufacturers realized the “very real problem” of semiconductor shortages and “capitalized on the trend among state and local officials to pay a lot of taxpayer money to host one of these facilities.” are using it.”

Austin City Council member Vanessa Fuentes said residents in her district are worried about being pushed out of their homes or seeing corner stores replace expensive grocery stores. She said the city had the “upper hand” in dealing with tech companies and should ensure that cuts in any deals with tech companies were enough for existing residents.

“If it’s not good enough, we obviously don’t have to do it,” she said. “Because there’s a lot of risk of what could happen with this type of development, especially in terms of displacement.”

In Taylor, Samsung’s Booster believes they can manage those concerns if they get the project going.

“Yes, it will be more traffic. Yes, there will be some rising property values,” Mr. Davis said. “But I think it will also help create jobs.”

To sweeten the deal, Mr. Davis made another offer to the chipmaker at a recent public meeting: He would make a Samsung yellow.

“I think 5,000 daily construction workers patronize all these small businesses – professionals will lose more than a mile,” he said.

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