Va. officials woo chip manufacturers

U.S. Sen. Mark Warner and state and local economic development officials are vying to attract semiconductor chip manufacturing facilities to four Virginia industrial sites as the commonwealth gears up to fight for a piece of the financial pie from sweeping federal legislation that promises to ramp up chip production in the U.S.

Representatives of Chesterfield, Henrico and Pittsylvania counties and the cities of Chesapeake and Danville joined with Warner, Virginia Economic Development Partnership President and CEO Jason El Koubi and Micron Technology Inc.’s senior vice president and general counsel, Rob Beard, Thursday during a meeting at Virginia Commonwealth University to discuss how to make Virginia more competitive. Officials from VCU and Virginia Tech also attended the meeting, which was closed to the press and public.

The meeting coincided with President Joe Biden issuing an executive order Thursday to kickstart the $280 billion CHIPS and Science Act, calling for swift implementation of a component of the bill that provides $52.7 billion in funding for domestic semiconductor manufacturing and research. Biden’s executive order establishes an interagency steering council to coordinate implementation of that funding, co-chaired by National Economic Director Brian Deese, National Security Advisor Jake Sullivan and Alondra Nelson, the acting director of the Office of Science and Technology Policy.

The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022 is “a pretty historic piece of legislation that provides not only significant federal funding for semiconductor fabs … but also provides a number of other funding streams to enhance U.S. capabilities in the industry, including research,” El Koubi said.

It was initially introduced in 2020 in an earlier form by Warner, Virginia’s Democratic senior senator, and Texas Republican Sen. John Cornyn; the act was passed by Congress this summer and Biden signed it into law on Aug. 9.

According to the Semiconductor Industry Association, the U.S.’s share of global semiconductor manufacturing capacity has decreased from 37% in 1990 to 12% today because other nations have been outpacing the U.S. in investing in the industry.

As chair of the Senate Select Committee on Intelligence, Warner has been outspoken about the need for domestic chip manufacturing. It’s a refrain he returned to Thursday as he toured labs at VCU’s C. Kenneth and Dianne Harris Wright Virginia Microelectronics Center. 

“We’ve seen over the last 30 years, America dominated this industry to now … we only make about 12%,” Warner said. “And America, on the manufacturing side, we don’t make any of the cutting-edge chips.” 

‘In the hunt’

Several sites in Virginia offer the space needed for the potential manufacture of semiconductors, which can require up to 1,000 acres, Warner said. A likely location for a new plant could be found in rural Southern or Southwestern Virginia.

Pittsylvania County’s Southern Virginia Megasite at Berry Hill is one of three already established industrial megasites in Virginia. The Danville-Pittsylvania Regional Industrial Facility Authority owns the 3,528-acre site, of which about 1,900 acres are developable. The Berry Hill megasite lost to Savannah, Georgia, in its bid to attract Hyundai Motor Co.’s new $5.5 billion electric vehicle plant, which would have added about 8,100 jobs.

The Berry Hill megasite has power, water, natural gas and other necessary infrastructure in place, and could support 1.2 gigawatts of power in four to five years, said Pittsylvania Economic Development Director Matthew Rowe. Based on experience working with site consultants, those attributes make the site competitive for attracting semiconductor manufacturing operations.  “It really comes down to availability of power, availability of water and then, frankly, demonstrating that the activity is not going to be impacted negatively by rail traffic or vibration, because the equipment is so sensitive,” Rowe added.

Henrico County’s White Oak Technology Park was previously home to a 1 million-square-foot chip manufacturing facility that was closed by Qimonda AG in 2009. It now is home to a QTS data center, and Meta Platforms Inc. (Facebook) has a 2 million-square-foot data center on the site, which has 500 shovel-ready acres. 

 “We’re absolutely in the hunt, talking to prospects and excited about what might come,” Henrico Economic Development Association Executive Director Anthony Romanello said, adding, “We’ve been in conversations for quite some time, well before the CHIPS Act was passed, but the CHIPS Act we hope is really going to be the tipping point.”

More recently, Intel Corp. considered Chesterfield County’s Upper Magnolia Green site for a $20 billion, 100-acre facility, but Intel ultimately choose Ohio instead, forging that state’s largest-ever economic development deal.

“Even though we made it to the final list [for Intel], we’re continuing to develop the site in accordance with the requests that they had to build their [semiconductor fabrication] plant,” said Chesterfield Economic Development Director Garrett Hart. 

Upper Magnolia Green is 1,728 acres, of which about 1,000 are available for development but not shovel-ready.

“If we develop a site capable of taking [Intel], then everybody else in the business, we should be able to accommodate,” Hart added. 

Chesapeake’s Coastal Virginia Commerce Park could also be a contender, according to a semiconductor proposition presentation El Koubi made during Thursday’s meeting that he provided to Virginia Business. The park, which also appears on VEDP’s site selection database, has electric, water, sewer and broadband utilities in place, but not natural gas. 

Raising the bar

While there may be shovel-ready sites to lure manufacturers, those locations alone might not be enough.

New York, Texas, Arizona and Ohio have “really raised the bar in going after semiconductors,” Romanello said.

To compete, Virginia needs to offer greater incentives.

“One of the things I think Virginia is going to need to do is both have sites prepared but also be willing to put more resources into these packages if we’re going to be competitive,” Warner said, citing New York’s corporate subsidy of up to $10 billion in tax credits for “green” semiconductor manufacturers over a 20-year period, enacted on Aug. 11, among other states’ incentives. 

Every deal is also going to be different.

“We can structure our incentive packages in a way that is both competitive and that mitigates financial risk to the commonwealth,” El Koubi said.

Pittsylvania’s Rowe said that Virginia incentives tend to focus on longer-term, performance-based metrics, while “in many states … they tend to just be much more aggressive in those funds up front, for very well-known, name-brand entities that they feel have very low risk factors.” 

For example, Georgia gave Hyundai an incentives and tax break package worth $1.8 billion to locate its first EV manufacturing plant in Savannah.

“You may go to other states and they might offer you more money at a local level up front, but the reason they’re doing that is because they’re just trying to catch up to where we already are,” said Rowe, who notes that Pittsylvania County and Danville received more than $290 million from state and local governments and workforce programs to develop its Virginia Megasite. 

 Henrico County uses a performance-based model when it considers making offers.

“The company says they’re going to do something, they do something, and we verify it and they get the incentive,” Romanello said. “We don’t do upfront incentives because we don’t want to put taxpayer money at risk. … I think we offer very attractive packages.”

Looking ahead

Beyond attracting the major chip manufacturers, officials told Virginia Business they’re looking at the entire semiconductor manufacturing ecosystem, which includes the supply chain for components and related materials. And that provides even more opportunities, El Koubi said.

“We are both looking at opportunities for Virginia to attract the semiconductor [fabrication] opportunities themselves for large semiconductor plants, but we’re also looking at ways to cultivate the ecosystem, building on Virginia’s existing strengths in the semiconductor space,” he said. 

Those strengths include close to 30 companies in the semiconductor industry — providing production, equipment testing, construction and other services — and an advanced manufacturing and related industries workforce numbering almost 350,000.

Warner wants to see Virginia increase its capacity to manufacture the tools and equipment that go onto the “fab floors.” That’s a niche that has not yet been co-opted by Asian countries that otherwise dominate the semiconductor industry.

The state also boasts several universities with clean rooms — engineered spaces that offer isolated, controlled environments for working on semiconductors. In order of largest to smallest clean rooms, these include spaces at the University of Virginia, Virginia Commonwealth University, Norfolk State University, Old Dominion University, Virginia Tech and George Mason University.

Norfolk State unveiled its 6,000-square-foot Micron-NSU Nanofabrication Cleanroom last October, and this summer, the school became the first historically Black college or university to host one of the Idaho-based semiconductor manufacturer’s “Chip Camps,” a summer STEM program for rising eighth- and ninth-graders.

Micron is expanding its Manassas facility, a $3 billion economic development deal that may be the largest in state history (depending on Amazon.com Inc.’s investment on its HQ2 headquarters). Micron is expected to create 1,100 additional jobs at the Manassas plant, bringing its workforce there to about 2,600 employees. On Aug. 9, the same day Biden signed the chips legislation, Micron announced it would invest $40 billion through the end of the decade to build manufacturing facilities in the U.S. The company plans to announce sites in the coming weeks but is keeping a tight lid on its search. 

“I can’t comment on the process that we use as part of our site selection process, but Virginia historically has been a great place for us to operate,” said Beard, Micron’s general counsel. “We’re really happy with all of the people that we’ve worked with here.”

M.J. McAteer contributed to this story.