Visions of a US computer chip boom shake up cities

TAYLOR, Texas – The shortage of computer chips has sapped the energy of the global economy, hurting sectors as diverse as automakers and...


TAYLOR, Texas – The shortage of computer chips has sapped the energy of the global economy, hurting sectors as diverse as automakers and medical device makers and contributing to fears of high inflation.

But many states and cities in America are starting to see a silver lining: the possibility that efforts to sharply increase chip production in the United States could lead to a busy chip factory in their backyards. And they are racing to get a share of the potential boom.

One of those towns is Taylor, a Texas town of about 17,000 people about a 40-minute drive northeast of Austin. Executives here are working hard to secure a $ 17 billion Samsung factory that the company plans to build in the United States starting early next year.

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

But Taylor is not alone. Officials in Arizona and Genesee County in upstate New York are also trying to win over the company. The same goes for politicians in neighboring Travis County, home to Austin, where Samsung already has a factory. Locations in the tri-state “have offered a solid property tax rebate” and funds to build the plant’s infrastructure, Samsung said in a filing. Congress plans to offer its own grants to chipmakers who build in the United States.

It remains to be seen where the Samsung plant will land. The company says it’s still weighing where to put it. A decision should be announced overnight.

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

It might just be a warm-up act. The Senate passed a bill to provide chipmakers with $ 52 billion in subsidies this year, a plan backed by the Biden administration that would be Washington’s biggest investment in industrial policy in decades. The House has yet to consider it. Nine governors said in a letter to congressional leaders that the funding “would provide a powerful new tool in our states’ economic development toolkits.”

At Taylor, even the possibility of the arrival of Samsung gives rise to hope. Business owners say it would attract more customers to the local brewery and the quiet downtown area. Parents believe the factory’s state-of-the-art assembly line would inspire high school students in the city. Residents believe land prices would rise rapidly – values ​​have already risen slightly in recent months, just in case, a real estate agent said.

“Something like that can be a bullet in the arm,” said Ian Davis, general manager of Texas Beer Company, which opened a bar 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 only 12% of world production.

Lawmakers say chip shortages shed light on how America’s limited role in the industry puts the country’s economy in a precarious position. Politicians are also concerned that China will take steps to increase its control over global semiconductor supplies, potentially leaving the United States at a technological disadvantage compared to a geopolitical rival that would have national security implications. .

But attempts by cities to attract factories raise questions about how far communities should go – and how much taxpayer money they should pay – to get a share of the high-tech economy.

Chandler, Arizona, has approved up to $ 30 million in water and road improvements to support an Intel plant that opened in September. Phoenix will spend around $ 200 million on the infrastructure of a new factory by the Taiwan Semiconductor Manufacturing Company, another major chipmaker. When the company announced the plant in 2020, it these grants were essential to his plans.

Critics of business tax incentives say the money could be better spent on basic infrastructure and public schools. They say cities could spend taxpayer money unnecessarily, as factors like the availability of talent and natural resources are more important to chipmakers than subsidies. And they argue that cities end up sacrificing the most important thing a big industrial project can bring: tax revenue.

“There are clearly benefits,” said Nathan Jensen, a professor at the University of Texas at Austin who studies grant programs. “The problem is, if you literally give away a lot of these perks to land the business. “

Many residents of Taylor said this was the price to pay for energizing the town’s renewal.

Taylor – named after a railroad executive – was once a hub for shipping cattle and cotton. Louie Mueller Barbecue opened in 1949 and still attracts carnivores with its brisket and prime rib.

But over the past several decades, residents said, downtown Taylor has lost some vitality.

They tried to change that by attracting new small businesses to the city and renovating an old building that now houses Mr. Davis’ sales room, converted lofts, and a cafe that serves babka and chocolate and chocolate brownies. tahini. Another group has redeveloped the city’s old high school to house small businesses, including restaurants and a pinball machine. The city has created a park in the city center.

“By bringing this, something that is going to stay here indefinitely, the revenue that this brings to our city and our schools, in particular, is going to be huge,” said Susan Green, a Taylor resident who has children in her system. school.

Steve Adler, the mayor of Austin, said Austin’s grants to Samsung in the 1990s had a positive effect on the city, which has grown rapidly in recent years. Tesla and Oracle recently moved their headquarters to Austin, and Facebook and Apple have large operations there. According to one estimate, the city is the best site in the country for commercial real estate investment.

Austin and the surrounding county have had their own discussions with Samsung about the new plant the company has planned. Mr Adler said he wanted the city to be a competitive site for the Samsung plant.

“It has certainly been very beneficial for our city and our region to have them here,” Adler said of Samsung. But Pat Garofalo, director of national and local policy for the American Economic Liberties Project, a liberal group that criticizes big tech companies, said the money would be better spent on projects that make a city attractive to a wide variety. companies – like public schools – instead of just one suitor.

He said manufacturers have sensed the “very real problem” of the semiconductor shortage and “are using it to capitalize on the tendency of state and local authorities to pay big taxpayers’ money to host one of these. these facilities “.

Austin City Council member Vanessa Fuentes said residents in her neighborhood feared being evicted from their homes or that convenience stores would be replaced with expensive grocery stores. She said the city has the “edge” in its dealings with tech companies and should make sure any deals with tech companies are sufficient for existing residents.

“If it’s not good enough, then we don’t need to do it, quite frankly,” she said. “Because there are too many risks on what could happen with this type of growth, in terms of displacement in particular. “

In Taylor, Samsung boosters think they can handle these issues if they get the project.

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

To sweeten the deal, Mr Davis recently made another offer to the chipmaker at a public meeting: he’ll make a Samsung lager.

“I think having 5,000 construction workers a day go to all these small businesses – the pros will outweigh the cons a mile,” he said.

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Newsrust - US Top News: Visions of a US computer chip boom shake up cities
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