An engineer analyzes a computer chip in a lab. Oregon is well-positioned to take advantage of federal funding for the expansion of the industry, experts say. (Getty Images)
Eight months after Congress passed the CHIPS and Science Act, a $280 billion boost to the U.S. semiconductor industry, a panel of state legislators on Wednesday endorsed the Oregon CHIPS Act to give local companies a leg up in competing for federal money.
The bipartisan, bicameral 14-member committee started its work in January with the goal of making Oregon as competitive as possible for the nearly $53 billion in grants and tax credits the U.S. Department of Commerce will begin providing this year for semiconductor research and manufacturing because of the CHIPS and Science Act.
Senate Bill 4, the Oregon CHIPS Act, would create a $200 million fund for grants and loans for businesses seeking federal funding to expand in Oregon. It also would give Gov. Tina Kotek the authority to designate some land outside urban growth boundaries, the invisible line that limits where cities can expand, as industrial land for annexation by cities. In particular, Hillsboro is seeking to add hundreds of acres of land near its northwest corner, creating a roughly 800-acre plot that could be used for a major manufacturing facility, or fab.
While the bill is the Legislature’s main response to the federal law, it fits within a patchwork of other proposals that address semiconductor industry needs, lawmakers said. They highlighted last year’s $200 million workforce training plan, which focuses on jobs in manufacturing and health care, as well as pending legislation to expand broadband, build more homes and make child care more affordable and available.
Separately, Kotek last month announced a $1 million grant program to help small and mid-sized firms prepare applications for federal funding. Business Oregon will run that grant program, and it plans to post updates online once it finalizes rules for the grants.
Lawmakers from both parties said the committee’s work could provide a roadmap for future business development. Rep. Jeff Helfrich, R-Hood River, said Oregon has had a reputation for not being business-friendly, but that lawmakers were finding ways to assure businesses that the state is welcoming.
“For far too long, it’s been uncertainty that has kept businesses from investing in our state,” Helfrich said.
Senate Majority Leader Kate Lieber, D-Beaverton, said she learned over the past weeks that the state doesn’t have a good understanding of where available industrial land is and what it needs to be ready for development. The Legislature and state government should continue working on making sure land is available for manufacturing, she said.
“This is part of a bigger strategy that the state of Oregon really needs to look at,” Lieber said. “We can be proud of this bill, we know it’s a start.”
More than 40,000 Oregonians work in the semiconductor industry – only California and Texas have more residents employed by the industry. About 15% of the nation’s semiconductor workforce is in Oregon, though only about 1.3% of the U.S. population lives here.
About half of Oregon’s semiconductor employees works at Intel, the state’s largest private employer with nearly 22,000 employees in Washington County. Intel has suppliers in 15 of Oregon’s 36 counties.
Tax credits likely
Senate President Rob Wagner told reporters last week that legislators expect to pass some form of research and development tax credit before the legislative session ends in June.
“Most of our members, including the folks that are on that committee, are dedicated to having an R&D tax credit that is limited to the CHIPS Act,” Wagner said.
A subgroup of the semiconductor committee will work on the tax credit proposal, Senate Bill 669. In its current form, the proposal would restore a research and development tax credit that allowed corporate taxpayers to claim a credit of up to $1 million a year before it expired in 2017.
But House Speaker Dan Rayfield, D-Corvallis, said it wasn’t a foregone conclusion that the Legislature will approve a tax credit. Supporters are going to have to earn the votes, he said.
Rayfield also insisted that Oregon’s comparatively slow speed in passing incentives wasn’t a missed opportunity. For instance, he said, the Commerce Department guidelines released last month put much less weight on tax credits than other incentives, indicating that states that build incentive packages based on tax credits may have to change their policies.
“When you move early, you’re crafting a package with a crystal ball,” he said. “We knew in the first month of the session that the Department of Commerce was going to come out and really identify what makes the package competitive so you could draw down federal funds.”
Along with working on tax incentives, committee chair Janelle Bynum, D-Clackamas, said the panel will be working on ways to better market the state. While Oregon has long been a leader in the semiconductor industry, national press coverage about states competing for the CHIPS Act has focused on Texas, Ohio, New York and Arizona.
Farms versus factories
Most opposition to the bill centered on the proposed changes to Oregon’s land use system and the idea that land now designated for farming could become a semiconductor factory.
Two Republicans, Reps. Ed Diehl of Stayton and Bobby Levy of Echo, voted against the measure. Diehl said it didn’t go far enough to include recommendations from an industry task force, including tax incentives, and that the Legislature, not the governor, should decide what land could be developed.
Levy said she hopes Kotek will consider the importance of preserving Oregon farmland. The $5 billion agricultural industry and its international exports are a key piece of the state’s economy, she said.
“Oregon agriculture is an important part of our economic future and our economic stability,” she said. “We’re the number one exporter of berries into Asian countries.”
Rep. Mark Meek, D-Gladstone, noted that Oregon has about 16 million acres of farmland, and adding semiconductor factories could take up to 5,000 acres. It’s a small cost to pay for a large return, he said.
“I appreciate the consternation of us bringing in land, potentially farmland and high-value farmland, but we’re going to be bringing in high-value jobs and high-value future,” he said.
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