TAYLOR, Texas – The shortage of computer chips has stolen energy from the global economy, penalizing industries as diverse as automakers and medical device manufacturers, and fueling fears of high inflation.
But many states and cities in America are starting to see a silver lining: the possibility that efforts to ramp up chip production in the United States will result in a busy chip factory in their backyard. And they are running for a piece of the potential boom.
One of those towns is Taylor, a town of about 17,000 people about 40 minutes northeast of Austin. The leaders here are pulling out all the stops to get a $ 17 billion Samsung factory that the company plans to build in the US early next year.
The city, school district, and county plan to offer Samsung hundreds of millions of dollars in financial incentives, including tax rebates. The community also has arranged for water from an adjacent county to be used by the facility.
But Taylor is not alone. Officials in Arizona and Genesee County, New York State are also trying to woo the company. Also politicians in nearby Travis County, home of Austin, where Samsung already has a plant. Locations in all three states “offer solid property tax breaks” and funds to expand the infrastructure for the plant, Samsung said in a filing. Congress is considering offering chip manufacturers that build in the US their own subsidies.
Where Samsung’s work will end up remains open. The company says it is still weighing where it belongs. A decision is expected to be announced every day.
The federal government has called on companies like Samsung, one of the world’s largest manufacturers of high-tech components, to build new plants in the United States, calling this an imperative of economic and national security. Intel broke ground for two new plants in Arizona in September and could announce the location for the planned new manufacturing campus by the end of the year.
This could just be a warm up act. The Senate passed bill earlier this year that will give chipmakers $ 52 billion in subsidies this year, a Biden government-sponsored plan that would be Washington’s largest industrial policy investment in decades. The house has yet to think about that. Nine governors, in a letter to congressional leaders, said the funding would “provide a new, powerful tool in our states’ toolboxes for economic development.”
At Taylor, even the possibility of Samsung’s arrival inspires hope. Business owners say it would bring more customers to the local brewery and the quiet downtown area of the city. Parents think the factory’s state-of-the-art assembly line would inspire the city’s high school students. Local residents believe land prices would rise quickly – values have already risen in recent months due to the possibility, a real estate agent said.
“Something like that can be a shot in the arm,” said Ian Davis, general manager of the Texas Beer Company, which opened a taproom in downtown Taylor five years ago.
The vast majority of semiconductors – an industry that had sales of nearly $ 450 billion in 2020 – are manufactured in Taiwan, Korea, and mainland China. The United States controls only 12 percent of world production.
Legislature says the chip scarcity illuminates how America’s limited role in industry is placing the country’s economy in a precarious position. Politicians also fear China is taking steps to tighten its control over global semiconductor shipments, potentially putting the United States at a technological disadvantage against a geopolitical rival that could impact national security.
But the cities ‘attempts to attract the plants begs the question of how far communities should go – and how much taxpayers’ money they should pay – to get a piece of the high-tech economy.
Chandler, Arizona approved up to $ 30 million in water and road improvements to support an Intel plant that broke ground in September. Phoenix will spend approximately $ 200 million on the infrastructure for a new factory for Taiwan Semiconductor Manufacturing Company, another large chip manufacturer. When the company announced the facility in 2020, it was said subsidies were decisive for his plans.
Critics of corporate tax incentives say the money could be better spent on basic infrastructure and public schools. Cities could spend taxpayers’ money unnecessarily because factors such as 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 large industrial project can contribute: tax revenue.
“That has clear advantages,” says Nathan Jensen, a professor at the University of Texas at Austin who studies funding programs. “The problem is when you are literally giving away a lot of these benefits in order to win the company over.”
Many Taylor residents said this was the price they had to pay to speed up the city’s revitalization.
Taylor – named after a railroad manager – was once a hub for shipping cattle and cotton. Louie Mueller Barbecue opened in 1949 and still attracts carnivores with its brisket and beef ribs.
But in the past few decades, local residents said downtown Taylor has lost some of its vitality.
They tried to change that by attracting newer small businesses to town and renovating an old building that now houses Mr. Davis’ taproom, converted lofts, and a cafe that serves babka and chocolate tahini brownies . Another group took advantage of the town’s old high school to house small businesses like restaurants and a pinball bar. The city has set up a park in the city center.
“If we bring this in, something that will be here indefinitely, the income it will bring to our city, and especially to our schools, will be huge,” said Susan Green, a resident of Taylor, the children in her school system Has.
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 headquarters to Austin, and Facebook and Apple have large offices there. According to one estimate, the city is the top site in the nation for commercial real estate investments.
Austin and the surrounding county have had their own talks with Samsung about the proposed new factory. Mr. Adler said he wanted to make the city a competitive location for the Samsung plant.
“It has certainly been of great benefit to our city and our region to have them here,” said Mr. Adler of Samsung. But Pat Garofalo, the director of state and local politics for the American Economic Liberties Project, a liberal group critical of large tech companies, said the money should be better spent on projects that make a city attractive to a wide variety of businesses – like public schools – instead of a single applicant.
He said manufacturers had sensed the “very real problem” of semiconductor shortages and were “using it to capitalize on the tendency of state and local officials to pay large amounts of taxpayers’ money to run one of these facilities.”
Vanessa Fuentes, a member of Austin city council, said residents in their district were concerned about being pushed out of their homes or seeing mom and pop stores replaced with expensive grocery stores. She said the city has the “upper hand” in dealing with tech companies and should ensure that any tech company agreements are sufficient for existing residents.
“If it’s not good enough, honestly we don’t have to do it,” she said. “Because the risk of what could happen with this type of growth is too high, especially in relation to displacement.”
In Taylor, Samsung’s boosters believe they can address these concerns if they get the project.
“Yes, there will be more traffic. Yes, there will be some rising property values, ”said Mr. Davis. “But I think it will also help create jobs.”
To sweeten the deal, Mr. Davis made the chipmaker another offer at a recent public meeting: he’ll make a Samsung Pale Ale.
“I think 5,000 construction workers a day are helping all of these small businesses – the benefits will outweigh the disadvantages by a mile,” he said.