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Oregon’s semiconductor industry would grow quickly with state investments, study finds

Intel employees in clean room "bunny suits" work at Intel's D1X factory in Hillsboro, Oregon. The grand opening of D1X's "Mod3" in 2022 will provide Intel engineers with an additional 270,000 square feet of clean room space to develop next-generation silicon process technologies.
Intel Corporation
Intel employees in clean room "bunny suits" work at Intel's D1X factory in Hillsboro, Oregon. The grand opening of D1X's "Mod3" in 2022 will provide Intel engineers with an additional 270,000 square feet of clean room space to develop next-generation silicon process technologies.

The economic study comes as lawmakers mull options for $200 million in investments to spur the semiconductor industry’s growth.

As Oregon legislators debate how to spend about $200 million to grow the state’s semiconductor industry, an economic study predicts that those investments could add 35,000 jobs and nearly $3 billion in new revenue over the next 20 years.

The Legislature intends to pass a package of policy changes and funding proposals by mid-March, in time for the U.S. Department of Commerce to open applications for funding through the federal CHIPS and Science Act, which will provide almost $53 billion in grants and tax credits for semiconductor research and manufacturing.

Lawmakers and Gov. Tina Kotek are considering about $200 million in state business incentives, including forgivable loans. They’re also trying to ease barriers to building new facilities, as a recent survey found the state has fewer than 10,000 acres of land zoned for industrial uses and only about one-fifth of that land is ready for development.

That’s a far smaller investment than in some other states – New York recently pledged$5.5 billion in state incentives for a single computer chip factory, and Michigan has approved hundreds of millions in incentives intended to attract chip manufacturers.

But economists and legislators are bullish about Oregon’s chances of competing for federal funding and growing its semiconductor industry because of that sector’s long history in the state.

The computer and electronics sector makes up a greater share of Oregon’s economy than any other state’s, according to a study released this week by ECONorthwest, an economic consulting firm. The Oregon Business Council commissioned the study.

As a result, Oregon has a comparative advantage over other states, Mike Wilkerson, a partner at ECONorthwest, said during a press conference about the report.

“Leverage your existing strength to both retain and grow individual areas of strength,” he said. “No state is better positioned to do that than Oregon.”

Wilkerson’s study found that the state could recoup a hypothetical $100 million investment in the semiconductor industry within two years because of increased economic activity, including income taxes paid by businesses and semiconductor industry employees and the money those employees will spend elsewhere in the state.

Kotek’s proposed budget calls for $200 million in state lottery proceeds to be invested in a new “Opportunity Fund” for business incentives for advanced manufacturing, including, but not limited to, semiconductor manufacturing.

“Certainly the semiconductor folks are out of the gate first, but we need to support advanced manufacturing writ large in our state,” Kotek said during a press conference after announcing her proposed budget last month. “I’m really focused on supporting our in-state employers who are perhaps in the supply chain in advanced manufacturing or semiconductors, people who are already here.”

A draft legislative proposal also calls for $200 million for an opportunity fund that would create forgivable loans for businesses, though the money would come from the state’s reserves in the Rainy Day Fund in the legislative proposal. The Legislature is also seeking $10 million for universities for semiconductor research and training.

The legislative proposal would give Kotek executive authority to identify suitable land adjacent to urban growth boundaries – the invisible state-approved line around cities that limits where they can grow – and work with local officials to rezone it for semiconductor or manufacturing use. If projects don’t start by an agreed-on date, the land would revert back to its original zoning.

But members of the Legislature’s bipartisan semiconductor committee, including Rep. Ed Diehl, R-Stayton, said the finished proposal also needs tax credits for investment and research and development.

“They need to be in there if we stand a chance of getting this work, and they should be competitive with our neighbors,” Diehl said.

Rep. Janelle Bynum, D-Clackamas and one of the semiconductor committee’s co-chairs, agreed that research and development tax credits need to be part of the proposal.

Lawmakers are considering one proposal for increased corporate income tax credits for research and development, but Sen. Mark Meek, D-Gladstone and chair of the Senate committee that will decide whether that proposal advances, said it needs to be more tailored to semiconductors and last for a limited time. As written, it could cost the state $50 million to $80 million annually, he said.

Republicans also described concerns that the proposal would let companies receive forgivable loans for partnering with universities, specifically historically Black colleges and universities, that don’t have to be in Oregon. Bynum said one of the goals of the federal funding is to get more people from underrepresented backgrounds working in the semiconductor industry, and the state’s loan would help companies like Intel that bring interns and fellows from historically Black schools to Oregon. That includes students who grew up in Oregon and want to return, Bynum said.

Rep. Daniel Nguyen, D-Lake Oswego, said he isn’t sold on the idea of forgivable loans, which would require businesses to submit another set of applications to the state along with applications for federal funding. Instead, he said, businesses should come to the state and share what they need.

“I kind of envisioned this process being more like ‘Shark Tank,’” Nguyen said. “Give us your best pitch. Not everyone needs land. Not everyone needs cash. What they may need is other support.”

The Oregon Capital Chronicle is a professional, nonprofit news organization. We are an affiliate of States Newsroom, a national 501(c)(3) nonprofit supported by grants and a coalition of donors and readers. The Capital Chronicle retains full editorial independence, meaning decisions about news and coverage are made by Oregonians for Oregonians.

Julia Shumway has reported on government and politics in Iowa and Nebraska, spent time at the Bend Bulletin and was a legislative reporter for the Arizona Capitol Times in Phoenix. Julia is an award-winning journalist who reported on the tangled efforts to audit the 2020 presidential election results in Arizona.