In recent weeks, Gina Raimondo, the commerce secretary, has spoken with Senator Mark Kelly of Arizona, spent time with the president of Arizona State University and appeared at a conference with the mayor of Phoenix.
Their discussions centered around one main topic: chips.
Ms. Raimondo is in charge of providing $52 billion for semiconductor research and manufacturing under the CHIPS Act, a financing package aimed at expanding domestic production of the critical technology that acts as the brains of computers. The legislation, which passed in August, is a critical piece of President Biden’s industrial policy and part of a push to ensure US economic and technological leadership over China.
Arizona wants to make sure it’s in a position to receive a piece of that once-in-a-generation flow of federal funds, for which the Commerce Department is expected to start accepting applications in a few days. As a result, Arizona officials flooded Ms. Raimondo to promote the state’s growing chip industry and spoke to the CEOs of giant chip companies like Intel and Taiwan Semiconductor Manufacturing Company.
Arizona, which competes for the subsidies along with Texas, New York and Ohio, may 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 major manufacturer in Ohio.
Arizona has also led the nation in chip investment since 2020, with announcements of two new chip manufacturing plants by TSMC and two additional factories from Intel that will cost a total of $60 billion. State leaders helped persuade companies to open the facility by offering large tax and water breaks and other infrastructure subsidies. They also promised to expand engineering and technical education in the state.
State officials and chip companies also acted as a lobbying block in Washington. They helped shape the CHIPS Act to include federal tax credits, grants, and research and workforce grants. TSMC expanded its lobbying staff to 19 people in two years, and Intel spent more than $7 million on lobbying efforts last year, the most it had spent in two decades. Arizona State University spent $502,000 on lobbying last year, also the most in two decades.
“It’s been an intentional effort and by everyone,” said Sandra Watson, president of the Arizona Commerce Authority, a nonprofit economic development organization that has helped lead state efforts to attract chip companies and push the Act. CHIPS. .
The Commerce Department is expected to begin awarding $39 billion in subsidies to semiconductor manufacturers soon, and then open the process to businesses, universities and others to apply for $13.2 billion in research and workforce development grants. The CHIPS Act also provides an investment tax credit of up to 25 percent of a manufacturer’s capital expenditure costs.
Ms. Raimondo has described the process as a “race” between states. “Every governor, every state legislature, every president of public universities in every state should be drawing up their plan of attack now,” she said in August during a visit to the technology research and development center at California State University. Arizona. “This is going to be a competitive process.”
The global race for computer chips
The Commerce Department declined to comment.
Arizona’s history with chip manufacturing dates back to 1949, when telecommunications hardware and service provider Motorola opened a lab in Phoenix that later developed transistors. In 1980, Intel built a semiconductor plant in Chandler, a southeastern Phoenix suburb, 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. That opened up an opportunity for Doug Ducey, a Republican who was then the governor of Arizona, and other state officials to transform their economy into a tech hub.
In 2017, Mr. Ducey and other Arizona officials traveled to Taiwan to meet with executives from TSMC, the world’s largest maker of next-generation chips. They promoted the state’s low taxes, its business-friendly regulatory environment, and Arizona State University’s school of engineering of more than 30,000 students.
Ducey, who was close to Trump, also had calls with Commerce Secretary Wilbur Ross, Defense Secretary Mark Esper and Secretary of State Mike Pompeo about financial incentives to expand domestic chip production.
“My job is to sell Arizona,” Ducey said. “In this case, it was to sell Arizona to TSMC but also to management.”
In 2019, Mr. Ducey helped set up calls between cabinet secretaries and TSMC executives to close a deal to open manufacturing plants in Arizona. The state promised tax credits and other financial incentives to help offset the company’s costs of moving production to the United States from Taiwan.
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 lines, sewer lines, 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, CEO of TSMC Arizona, adding that the CHIPS Act funds will allow the company and its providers to expand “in the coming years. .”
In early 2021, Pat Gelsinger, Intel’s CEO, announced a sweeping strategy to ramp up US chip production. States began petitioning the company. Arizona officials highlighted its long relationship with Intel and the 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 plants.
“The Arizona government has been a great supporter,” said Bruce Andrews, Intel’s director of government affairs. “By investing early in semiconductors, they created an ecosystem that has had a multiplier effect on jobs and huge economic benefits.”
But some of the tax breaks have riled Arizonans, who say the measures have hurt funding for public schools. The state ranks 47th in spending per student.
“We need to bring business to our state, but we need to find the balance,” said Beth Lewis, executive director of Save Our Schools in Arizona. “Corporations are choosing not to establish themselves in Arizona because of our devastated public education system.”
Arizona went ahead with lobbying Congress to create legislation for chip subsidies. In March 2021, Senator Kelly joined Senators John Cornyn, Republican of Texas, and Senator Mark Warner, Democrat of Virginia, the authors of the legislation that would become the CHIPS Act, in a call with the new Biden administration to lobby for White House support for funding.
Mr. Kelly, an early sponsor of the CHIPS Act, became the lead negotiator for the legislation in Congress. He negotiated the inclusion of a four-year, 25 percent investment tax credit in the bill, including a provision that guaranteed Intel and TSMC would get the tax credits even though their Arizona factory projects were announced before they were due. the bill will enter into force.
Mr. Kelly also helped Arizona State University President Michael Crow push for the inclusion of more than $13 billion in grants for research and development and workforce training. And Mr. Kelly and state leaders hosted administration officials at events to showcase the state’s semiconductor efforts as part of the White House manufacturing strategy.
“We have the potential to lead the nation in microchip production,” Kelly said in a statement. “I was honored to lead this effort and now I am working to maximize it for Arizona”
Ducey, who left office when his term ended in January, pushed for more technology-friendly policies, including a cut in income tax. He also said that he would use $100 million the state had received from federal Covid grants to attract more chip companies to help them apply for the 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 joining them on Air Force One.
Arizona officials continue to encourage 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. Katie Hobbs, the new Governor of Arizona and a Democrat, and Mr. Kelly announced how the state could benefit from the CHIPS Act.
“There is a solid pipeline,” Ms Watson said.
