Building economic strength through manufacturing

Summary

Slides from the Washington State Department of Commerce, Office of Economic Development & Competitiveness, presented to the House Innovation, Community & Economic Development, & Veterans Committee on December 5, 2023. The first presentation covers Substitute House Bill 1170, building economic strength through manufacturing, including its goals, the makeup of a Manufacturing Council and its reporting requirements. The second gives an update on the U.S. CHIPS and Science Act, stating that it describes $50 billion in funding but that only $39 billion was appropriated, including $6 billion in loan guarantees. It lists eligible covered entities, notable awards, major semiconductor investments by state, and state incentive programs such as Oregon's $210 million over 7 years.

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Full text

Substitute House Bill 1170

Building economic
strength through
manufacturing
House Innovation, Community & Economic
Development, & Veterans Committee Presentation

Carolyn Busch
WORKFORCE SECTOR LEAD & SECTOR LEAD COORDINATOR
OFFICE OF ECONOMIC DEVELOPMENT & COMPETITIVENESS

DECEMBER 5, 2023
Outcomes

1. Manufacturing and R&D in every region of the
   state
2. Dramatically expand manufacturing and small
   businesses, as well as women/minority-owned
   businesses in next 10 years




WASHINGTON STATE DEPARTMENT OF COMMERCE           2
Manufacturing Council
• Advise and consult on report
• Appoint from private, non-profit and public sectors
     • Small to mid-sized private sector manufacturing
     • Apprenticeship programs
     • Statewide business associations
     • Higher education
     • Workforce partners
• Equal representation of manufacturing business and labor
• All state agencies upon request

WASHINGTON STATE DEPARTMENT OF COMMERCE                      3
SHB 1170: Reporting
• Council: Biennial budget report on state of manufacturing and
  research and development (R&D), including challenges with
  legislative remedies
• Commerce: Every four years beginning December 1, 2022
    • Progress in developing, recruiting and retaining R&D
      employers and workers
    • Comparative analysis with other states’ policy toolkits for
      developing strength in R&D



WASHINGTON STATE DEPARTMENT OF COMMERCE                             4
Why focus on manufacturing? Middle class
jobs and a stronger economy for everyone.
                                          2020 Washington Tax Returns Adjusted Gross Income
   30%                                                        Source: IRS




   25%



   20%



   15%



   10%



    5%



    0%
         0           1              2                3                 4            5         6   7


WASHINGTON STATE DEPARTMENT OF COMMERCE                                                               5
U.S. CHIPS and
Science Act Update
House Innovation, Community & Economic
Development, & Veterans Committee Presentation

Dr. Joseph Williams
SECTOR LEAD, INFORMATION AND COMMUNICATION TECHNOLOGY
OFFICE OF ECONOMIC DEVELOPMENT & COMPETITIVENESS

DECEMBER 5, 2023
We strengthen communities




WASHINGTON STATE DEPARTMENT OF COMMERCE   7
    What is the CHIPS and Science Act?
Introduction and Background                              The U.S. is currently only 10% of global
                                                          commercial production
• Once a leader in semiconductors, the U.S. has lost
                                                         $50 billion in direct funding
  ground over the last several decades to Taiwan,
  South Korea and China.                                    • $11 billion is for R&D
                                                            • $39 billion is incentives for investment in
• Primary area of contention between the U.S. and             manufacturing
  China for both economic and military reasons.
                                                         Through all federal sources, budget targets $278
• The CHIPS Act of 2022 is meant to reposition the        billion in spending
  U.S. as a leader in semiconductors and to reshore
  the supply chain in the U.S.
• Marks a significant shift in U.S. industrial policy
  and represents a major opportunity for
  governments, universities, non-profits, and, most
  significantly, private businesses.

                                                             McKinsey & Company, 2022


    WASHINGTON STATE DEPARTMENT OF COMMERCE                                                                 8
Covered entities eligible for CHIPS Act funding include
A nonprofit entity, a private entity, a consortium of private entities, or
a consortium of nonprofit, public, and private entities that

     •    have a demonstrated ability to substantially finance, construct, expand,
          or modernize a facility relating to fabrication, assembly, testing,
          advanced packaging, production; or

     •    conduct research and development of semiconductors, materials used
          to manufacture semiconductors, or semiconductor manufacturing
          equipment


WASHINGTON STATE DEPARTMENT OF COMMERCE                                              9
Covered entities must secure a covered incentive
• an incentive offered by a state/local governmental entity to construct a new
  facility, or expand/modernize an existing facility; and/or

• a workforce-related incentive (including workforce training or vocational
  education)

• any concession with respect to real property, funding for research and
  development with respect to semiconductors,

• any other incentive determined appropriate by the Secretary of Commerce



WASHINGTON STATE DEPARTMENT OF COMMERCE                                          10
Reality Check
The CHIPS Act describes $50 billion in funding, but only $39 billion was
appropriated, including $6 billion in loan guarantees
   • Many of the incentives are tax credits
   • Expectation of local matching funds
U.S. Department of Commerce is prioritizing funding requests that also
explicitly address:
   • Environmental issues
   • Workforce development
   • Outreach to economically disadvantaged groups and rural areas
Property must be placed in service in 2023 - 2026


WASHINGTON STATE DEPARTMENT OF COMMERCE                                    11
Notable awards to date
$240M for U.S. Dept. of                                                31 selected Tech Hubs
Defense Innovation Hubs                   Workforce Hubs               eligible to apply for $500M
• New York ($40M)                         • Phoenix, Arizona           in funding from U.S. Dept.
                                                                       of Commerce.
• Arizona ($39.8M)                        • Columbus, Ohio
                                                                       Two regional Materials
• North Carolina ($39.4M)                 • Pittsburgh, Pennsylvania   Manufacturing Hubs:
• Indiana ($32.9M)                        • Baltimore, Maryland        • Gonzaga: Aerospace
• California ($26.9M)                     • Augusta, Georgia             Materials Manufacturing
• Ohio ($24.3M)                                                        • Oregon State: Mass Timber
                                                                         Tech Hub
• Massachusetts ($19.7M)
• California-Pacific-
  Northwest ($15.3M)



WASHINGTON STATE DEPARTMENT OF COMMERCE                                                              12
Business attraction by state
States that have seen major investments:   Specific outcomes:
• Arizona: $61.7 billion                   • Arizona: $32 billion from TSMC and Intel
• Texas: $61.1 billion                     • Idaho: $15 billion from Micron
• New York: $21.5 billion                  • Indiana: $1.8 billion from SkyWater
• Ohio: $20.1 billion                        Technology
• Idaho: $15 billion                       • New York: $6 billion from GlobalFoundries,
• Utah: $11 billion                          $100 billion from Micron
                                           • Ohio: $20 billion from Intel
                                           • Texas: $17 billion from NXP
                                             Semiconductors and Infineon Technologies
                                           • Virginia: $3 billion from Micron


WASHINGTON STATE DEPARTMENT OF COMMERCE                                                   13
What states are doing to compete
• 14 states have enacted state-level incentive programs
    Most aggressive are Arizona, California, New York, and Ohio
         New York: $10 billion in tax credits over 20 years
         Arizona: $100 million from American Rescue Plan Act funding
         California: $40 million in direct incentives
         Ohio: $650 million in tax credits over 30 years
    Pacific Northwest incentives
       Oregon: $210 million total funding over 7 years for grants, loans, tax incentives ($24.5
       million in fiscal year 2025)
       Idaho: Sales and Use Tax exemptions, no budget yet forecasted
• Branding
    Arizona: Silicon Desert
    Idaho: Silicon Spuds
    Oregon: Silicon Forest

WASHINGTON STATE DEPARTMENT OF COMMERCE                                                           14
Thank you!
Carolyn Busch
WORKFORCE SECTOR LEAD & SECTOR LEAD COORDINATOR                www.commerce.wa.gov
Carolyn.Busch.williams@commerce.wa.gov




Dr. Joseph Williams                                     Dave Pringle
SECTOR LEAD, INFORMATION AND COMMUNICATION TECHNOLOGY   LEGISLATIVE DIRECTOR
Joseph.Williams@commerce.wa.gov                         Dave.Pringle@commerce.wa.gov


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