Could a tax break from the Idaho legislature encourage Micron Technology Inc. to expand into Boise?
House Bill 678, which Governor Brad Little signed into law on March 23, provides a sales tax exemption for building materials used to build, expand or upgrade semiconductor factories in Idaho. Although the law, known as the Idaho Semiconductors for America Act, goes into effect July 1, it is tied to the passage of new study incentives by Congress that would provide more than $52 billion for the manufacture and research of domestic computer chips.
The Idaho Department of Commerce courted three companies for new or expansion projects. The companies involved have not been publicly identified, but the projects, if carried out, would involve a capital investment of more than $1.8 billion, according to the ministry.
“If these three qualifying projects were exempt, it would represent approximately $18 million “in lost state sales tax,” in exchange for $620 million in payroll impacts,” Rep. Dustin Manwaring, R- Pocatello, the floor sponsor for the bill, told the House Revenue and Taxation Committee during a hearing last month.
The three projects could create nearly 1,700 new jobs, according to Idaho Commerce. The largest would potentially bring 1,474 new jobs with an investment of $1.8 billion. Small projects could create 170 jobs with an investment of $24 million and 50 jobs with construction costs of $12 million.
Earlier this year, the Triangle Business Journal in Raleigh, North Carolina, reported that Micron was scouting multiple sites for a $40 billion plant, including Arizona, California, Texas and North Carolina. Boise did not appear to be on the list for this plant.
But a $1.8 billion project would still provide a significant boost to the Boise-area high-tech industry. So far, Micron isn’t saying if it plans to expand into Idaho.
“The Idaho Semiconductors for America Act is a positive step taken by Idaho to advance United States national security issues by encouraging advanced manufacturing in the state,” said Micron’s spokeswoman, Moira Whalen, via email. “The U.S. semiconductor industry is at an inflection point, and we are encouraged by the state and federal momentum that is building to bring more advanced manufacturing to the United States”
Micron CEO Sanjay Mehrotra, in testimony last month before the U.S. Senate Commerce Committee, said approval of the $52 billion for computer chips would “reignite investment in the development of the hand.” work, R&D, innovation and expansion of manufacturing in the short term”.
Idaho Commerce and sponsors of the Idaho bill urged passage as a matter of national security. While the United States’ share of global semiconductor manufacturing was 37% in 1990, it’s expected to fall to 10% by 2030, Jake Reynolds, the department’s director of business development and operations, told the House Revenue and Taxation Committee.
“Semiconductors are the brains of modern electronics and can be found in almost every electronic device we have today,” Reynolds said. “They are also present in almost all modern industrial commercial military systems, weapons systems, the internet and the power grid.”
During a hearing before the Senate Local Government and Taxation Committee, Sen. Jim Rice, R-Caldwell, said chips are increasingly being manufactured in unstable parts of the world.
“We all watched what was happening in Ukraine,” Rice said. “But that’s not the problem we’re talking about. We are seeing China saber-rattling when it comes to Taiwan. This part of the world is riskier than it has ever been.
China has long viewed Taiwan as a breakaway republic that should be reunited with China, similar to how Hong Kong was returned to Chinese control in 1997 after more than 150 years of British rule. There are growing fears that China will use the Ukrainian situation to invade Taiwan.
Micron has chip manufacturing facilities in Virginia, China, Taiwan, Singapore, India, Malaysia and Japan, as well as in Europe. It once produced chips in Boise, but ended production except for design and testing in 2009 and turned its Boise campus into the company’s main R&D center. It sold its Lehi, Utah factory to Texas Instruments in 2021.
Micron is the fourth largest semiconductor manufacturer in the world, the second in the United States after Intel. And it’s America’s largest manufacturer of memory chips.
A shortage of chips for all types of electronics, from smartphones to modern dishwashers, points to the need for increased production, Reynolds told the House committee. Manufacturing of more than 11 million vehicles was wiped out in 2021 due to a lack of chips, according to Statista.
Last fall, Micron said it plans to invest more than $150 billion over the next 10 years to expand and update its memory manufacturing capacity and to conduct research and development. This could include a possible expansion into the United States
The company is on a tear. Last week, Micron reported quarterly sales of $7.8 billion, up 25% from the same quarter a year ago.
As the coronavirus pandemic unfolded in March 2020, the Trump administration was concerned about US companies’ reliance on Chinese-produced chips, Reynolds said. US officials wanted Micron, Intel and other major US manufacturers, which sent their chipmaking overseas years ago, to bring it back to the United States.
Both houses of Congress have passed bills that would provide $52 billion for computer chip manufacturing in the United States, but the differences between the two bills must be resolved before a unified bill can be finalized. Competing bills use different approaches to try to make the United States more competitive with China.
The bills provide $39 billion in grants for the construction or expansion of microchip manufacturing plants, $10.5 billion for research and development, and $2 billion to meet the needs of the Ministry of Defense through research, testing and workforce development.
Idaho has 12,300 workers employed in the semiconductor industry, which ranks sixth in the nation, Reynolds said. It’s split between 50 companies. The average worker earns $135,000 a year, he said.
Micron, with 6,000 workers in the Boise area, is Idaho’s largest semiconductor company and its largest for-profit employer.
In 2008, the Idaho legislature tried to induce the French nuclear company Areva to build a plutonium enrichment plant near Idaho Falls. Lawmakers voted to cap the plant’s assessed value at $400 million if Areva invests at least $1 billion within seven years.
That never happened, but Micron then made the necessary investments and capped its property taxes in 2011.
Idaho’s new bill passed 39-22, with nine abstentions in the House and 30-5 in the Senate.
The Idaho Freedom Foundation opposed the bill.
“It’s an important industry, but if they’re patriotic, they shouldn’t need to come to the state for $18 million to invest in this country,” said Fred Birnbaum, the foundation’s legislative director, to the committee.
He noted that Meta, the tech company formerly known as Facebook, receives a significant tax break under a previous law that grants businesses an exemption from Idaho’s 6% sales tax if they spend at least $250 million on a new data center and hire at least 30 workers.
Meta plans to spend $800 million on a data center in Kuna, bringing the company a potential $48 million in sales tax savings.