Oregon loses out on new semiconductor manufacturing

Duncan Wyse, President of the Oregon Business Council, has gathered together a team of people to solve what he says is a big problem. Oregon appears to be losing out on new semiconductor factories. Intel just chose to build a new chip manufacturing campus in Ohio, which may end up being larger than Oregon’s current site. Wyse hopes the new task force can make Oregon a more attractive location for future manufacturing.

This transcript was created by a computer and edited by a volunteer.

Dave Miller: Duncan Wyse, the President of the Oregon Business Council, says Oregon is in danger of getting left behind. Intel recently announced it’s going to build what could become the largest campus of semiconductor factories in the world. That campus is not in Hillsboro, Intel’s research and development hub. It’s outside of Columbus, Ohio, other companies are building new chip fabrication plants or fabs, as they are known, in Arizona and Texas. That’s led Wyse and other business boosters to say that Oregon has to do more to become an attractive location for tech manufacturing. Duncan Wyse, welcome back.

Duncan Wyse: Thank you, Dave.

Miller: What’s driving this boom in domestic chip manufacturing?

Wyse: Well, there are really two things. One is just the shortages you hear about all the time and chips. So there’s a need to build more capacity and then there’s the desire to secure domestic supply chains here back in America and a lot of work by the Congress to try to really encourage domestic manufacturing of chips.

Miller: And to not be beholden to China?

Wyse:  That’s correct and it’s an extraordinary opportunity for Oregon and for the United States. We’re talking about 150 billion to $280 billion investment in this decade in semiconductor manufacturing. So it’s a huge opportunity.

Miller: What do you see as the biggest reasons that these new plants,  that gigantic fab campus announced recently, but others before that that they’re not being announced in Oregon?

Wyse: Yes, it’s kind of surprising for many especially when you start and understand that Oregon is really one of the global centers of semiconductor, we have 15% of the chip industry right here in Oregon which has a small population.  And we are the center for research and development as you mentioned. We have some very basic problems that we can start with, which is land availability. These facilities take a lot of land and we’ve run out of it in Oregon in the Portland region, both for chips, but frankly for manufacturing. We just got a real paucity.  So when you talk about 1000 acres, it’s simply not available right now in the metropolitan region. So we’re really not even on the screen. At the same time, I think it is a moment where we need to really understand what we have here and it’s extraordinary and it’s the time to really consider where we want to go and how we can really support this industry and all of its aspects as we go forward.

Miller: Intel’s new site in Ohio is 2000 acres. Obviously it’s not all being built yet, but that’s, it’s available to them. What’s the biggest available industrial or manufacturing site in the Portland area right now?

Wyse: The estimates, we might have 200 acres, it’s simply that we don’t have the acreage right now.  So for anyone considering building a new fad plant in Oregon, it’s right now not feasible until we address this land use issue.

Miller: Well, would that necessarily mean changing Oregon’s local land use planning or statewide guidelines?

Wyse: That’s the one of the questions we need to be addressing as we think about the growth of the semiconductor industry.  Metro had a hearing just last week on this topic to try to understand the state of manufacturing in the land availability. It’s time to take a hard look at this. I think it’s fair to say that our land use system faces challenges right now for manufacturing, again not just in the metro region, but all over the state. What we have found is there is just simply not enough land available for the potential expansion in manufacturing that could happen in Oregon in this decade that would bring hundreds of millions of dollars and lots of great jobs to Oregon. So, we need to look at it, but also, I would just point out that housing is also a huge issue. So I think land use is coming to the floor right now as a critical policy issue for the state.

Miller: Although a 2000 acre site is just immense, as the Intel CEO said that they could end up building the largest silicon manufacturing location on the planet, a mega fab made up of a bunch of factories. But Intel is just one company and it seems that a mega fab is just one model. Could there be a model for chip manufacturing that would work with smaller industrial sites? Does it need to be gigantic, sprawling campuses?

Wyse: Well, that’s what we’re going to be looking for and we’re creating a task force to look at the options and there certainly are potential smaller sites, but I would stress even at the smaller acreage, there is a paucity of land. So we’re gonna have to look at this  comprehensively and ask ourselves what do we want for our state.  These are great jobs that pay well, more than average, and generate a huge amount of benefit to our communities. So, but those are the questions we need to be tackling as we think about this industry and other manufacturing and the availability of land.

Miller: I should note that Intel is growing in Oregon. They’re about to open an expansion of a research facility in Hillsboro that cost $3 billion. And then last May their CEO told the Oregonian that they’d expand more in Oregon in three or four years. What does that tell you?

Wyse:  Well,  I would stress that Intel Oregon is like Pat Gelsinger, their CEO, said that at the leadership summit, it is really the vital center of Intel. I think we should take great pride in the fact that the innovations and semiconductors over the last several decades have largely happened here in Oregon. We are the epicenter of research development  and creating the most advanced fab plants in the world. So we need to recognize that and support the continued growth of Intel and the other semiconductor firms in Oregon and continue to maintain our leadership position. That means listening hard to those companies and addressing all their needs. Land is certainly one, environmental regulations, education and workforce and research and development, making sure we’ve got the right tax structures in place to make them competitive. So we need to look at all of those issues as we imagine the opportunities that we have for Oregon and semiconductor in the years ahead.

Miller: You mentioned workforce development. That’s an issue that the Governor has been talking about recently and would like to see money in the legislature this session for. What would you like to see with semiconductor manufacturing in mind, specifically?

Wyse: Well, there are different levels of workforce. One of the areas the Governor’s proposal would be looking into is the technician jobs that are in high demand right now, hundreds of thousands of opportunities. And there is a consortium of semiconductor companies that are working together to define their needs, to work with the community colleges and other training folks as well as community-based organizations to reach out and to find the talent that can take those jobs that are very well-paying jobs. And the Governor’s workforce investment proposal would allow that kind of work to accelerate. I’m very excited about that. There’s also, of course, the larger issue of university research and PhDs and engineers and all of those need to be part of our conversations as we think about this industry and its growth in the years ahead.

Miller: You also mentioned environmental regulation. What did you have in mind?

Wyse: Well, right now, I hear from lots of manufacturers about the concerns about both certainty– about knowing what the rules are going to be–and time. These companies need to move fast and right now what I’m hearing is just a great deal of uncertainty and just pace of making decisions. So we really need to investigate how to obviously maintain our strong environmental laws at the same time to make sure we’re doing it in a way that supports the companies that we want here.

Miller: You also mentioned taxes. According to Cleveland.com, Ohio Governor Mike DeWine’s administration pledged about $2 billion dollars in grants and infrastructure spending and in tax credits to Intel in addition to more than $100 million dollars from the state’s economic development nonprofit plus millions more in incentives in local government money. So clearly land alone is not enough to entice a company like Intel to invest heavily in a particular state, governments need to give them huge financial incentives to lure them. How do you weigh what a state might get against what it has to give?

Wyse: It’s a great question I think. Let’s first of all recognize what we get from these kinds of investments by these companies. We’re talking about very well-paid jobs, growth of many, many small and medium-sized businesses who support a company like Intel and other semiconductor firms and huge revenues for the public sector, a huge amount of revenue for community services. When you look at Oregon and its policies towards incentives, probably the most notable program is the Strategic Investment Program (SIP) which was adopted in the early 90s under Governor Barbara Roberts Administration. And the basic idea was to recognize that these companies are making enormous capital investments that are way outside of what you would normally associate with property taxes. And so what the SIP did is essentially give a tax reduction for the capital that is invested in the facilities but continued to apply property taxes to the land and facilities and the buildings themselves. That seems very fair to me and it led in the 90′s To the biggest expansion of capital investment in the history of the world with the semiconductor investments. We now have 55 billion dollars, I believe, in investment in this industry in Oregon and it’s brought enormous benefits. So I think we’ve got a pretty good base of incentives right now. We could look at more of the R&D tax credit. It would be nice to get it back in place. We do need to look at infrastructure investment again.  And in terms of facilities to build the infrastructure to support the facilities and the special public works program that the state has is a good tool for that. But I think if we can line up our incentives with all those other policy issues, I think we can be competitive here in Oregon.

Miller: Duncan Wyse. Thanks for joining us today.

Wyse: I appreciate it. Thank you.

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