TAYLOR, Texas — The shortage of computer chips has zapped energy from the global economy, punishing industries as varied as automakers and medical device manufacturers and contributing to fears about high inflation.
However, many cities and states in America are starting see the silver lining. There is the possibility that the United States will increase its chip production to create a bustling chip factory in their area. They are all racing to grab a piece of this potential boom.
Taylor, Texas’s 17,000-strong city, is one such town. It is located just 40 minutes northeast from Austin. These leaders are putting in all their efforts to get a $17billion Samsung plant built in the United States, which the company plans to start construction as soon as next year.
The county, the city, and its school district plan to offer Samsung hundreds, if not millions, of dollars in financial incentives, including tax refunds. The community has also arranged for water to flow in from a neighboring county so that the plant can use it.
Taylor is not the only one trying to lure the company. Officials in Arizona, Genesee County, upstate New York, are also trying to lure the company. The same goes for Austin’s Travis County politicians, which already have a Samsung plant. Locations in all three states “offered robust property tax abatement” and funds to build out infrastructure for the plant, Samsung said in a filing. The Congress is looking into whether it will offer subsidies to chip manufacturers that are based in the United States.
Where Samsung’s plant will land remains anyone’s guess. The company claims it is still considering where to place it. An announcement is expected any day.
The federal government has urged companies like Samsung, one of the world’s largest makers of the high-tech components, to build new plants in the United States, calling it an economic and national security imperative. Intel broke ground in Arizona on two plants in September, and could announce the site for a planned manufacturing campus by year’s end.
This could be a warm up act. The Senate passed a bill to provide chip makers $52 billion in subsidies this year, a plan supported by the Biden administration that would be Washington’s biggest investment in industrial policy in decades. It is still being considered by the House. Nine governors said in a letter to congressional leaders that the funding would “provide a new, powerful tool in our states’ economic development toolboxes.”
In Taylor, even the possibility of Samsung’s arrival is generating hope. According to local business owners, it would bring more customers to the local brewery and downtown. Parents think the factory’s cutting-edge assembly line would inspire the town’s high school students. Residents believe land prices would rise quickly — values have already edged up in recent months just on the possibility, one real estate agent said.
“Something like this can be a shot in the arm,” said Ian Davis, the 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. Only 12 percent global production is owned by the United States.
Lawmakers say the chip shortages illuminate how America’s limited role in the industry puts the nation’s economy in a precarious position. Politicians are also concerned that China is seeking to increase its global control over semiconductor supplies. This could leave the United States in a technological disadvantage, possibly against a geopolitical adversary that could have negative national security implications.
But the cities’ attempts to lure the plants are raising questions about how far communities should go — and how much taxpayer money they should pay — to get a piece of the high-tech economy.
Chandler, Ariz. approved $30 million worth of road and water improvements for an Intel plant that opened in September. Phoenix will spend around $200 million to build infrastructure for a new factory owned by Taiwan Semiconductor Manufacturing Company. This company is another major chip maker. When the company announced its plans for the plant in 2020 it stated that subsidies were vital to its success.
Critics of corporate tax incentives argue that the money could have been better spent on basic infrastructure or public schools. They claim cities may be spending taxpayer funds in an unnecessary way, as factors like the availability and quality of talent are more important to chipmakers than subsidies. They argue that cities end-up sacrificing tax revenue, which is the most important thing a large industrial project can bring to society.
“There’s clearly benefits,” said Nathan Jensen, a professor at the University of Texas at Austin who studies subsidy programs. “The problem is if you’re literally giving away a lot of those benefits to land the company.”
Many residents in Taylor said that was the price they needed to pay to supercharge the city’s revival.
Taylor — named for a railroad executive — was once a hub for shipping cattle and cotton. Louie Mueller Barbecue, which was opened in 1949, still draws carnivores to its brisket or beef ribs.
But in recent decades, residents said, Taylor’s downtown has lost some vitality.
They have tried to change that by luring newer small businesses to the city and by renovating an old building that now houses Mr. Davis’s taproom, converted lofts and a coffee shop that serves babka and chocolate-tahini brownies. Another group repurposed the town’s old high school to house small businesses including restaurants and a pinball bar. The city has remodeled a downtown park.
“Bringing that in, something that’s going to be here indefinitely, the revenue that it brings for our city and for our schools, particularly, is going to be enormous,” said Susan Green, a Taylor resident who has children in its school system.
Steve Adler, Austin’s mayor, stated that the city had seen rapid growth since the 1990s due to the positive effects of the subsidies Austin provided to Samsung. Tesla and Oracle recently relocated their corporate headquarters from Silicon Valley to Austin. Facebook and Apple also have large operations there. By one estimate, the city is the nation’s top site for commercial real estate investment.
Austin and the surrounding counties have had their own talks with Samsung about the plans for a new factory. Mr. Adler stated that he wants the city to be a viable location for the Samsung plant.
“It certainly paid a huge benefit to our city and our region, having them here,” Mr. Adler said about Samsung. But Pat Garofalo, the director of state and local policy for the American Economic Liberties Project, a liberal group that is critical of large tech companies, said the money would be better spent on projects that made a city attractive to a wide variety of businesses — like public schools — instead of on a single suitor.
He said the manufacturers sensed the “very real problem” of the semiconductor shortage and “are using it to capitalize on the tendency among state and local officials to pay a lot of taxpayer money for hosting one of these facilities.”
Vanessa Fuentes is a member of Austin City Council. She said that residents of her area were worried about being forced out of their homes and seeing their corner shops replaced by expensive grocery chains. She said the city had the “upper hand” in dealing with tech companies and should make sure that any deal it cut with tech companies did enough for existing residents.
“If it’s not good enough, then we don’t need to do it, quite frankly,” she said. “Because there’s too much at risk of what could happen with this type of growth, in terms of displacement specifically.”
In Taylor, Samsung’s boosters believe that they can manage those concerns if they get the project.
“Yes, it’ll be more traffic. Yes, there’ll be some rising 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 chip maker at a public meeting: He’ll make a Samsung pale ale.
“I think having 5,000 daily construction workers patronize all these small businesses — pros will outweigh the cons by a mile,” he said.
Source: NY Times
