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Has Oregon Been Blocked Out of the Chip Industry for Good?

One of Gov. Kate Brown’s priorities last year was to incentivize the expansion of semiconductor manufacturing in Oregon. But the industry appears to have overlooked the state so far.

(TNS) — As Oregon Gov. Kate Brown’s staff sketched out their priorities last June for the remainder of her term in office, Intel’s pending expansion made the shortlist.

Berri Leslie, the governor’s deputy chief of staff, suggested in a memo that additional tax breaks and other incentives could show the state’s commitment to the chip industry and encourage semiconductor manufacturers to expand in Oregon.

As Intel scouted locations for a new U.S. factory, Leslie’s memo focused in particular on a major obstacle to Oregon landing the big investment: a lack of ready-to-build industrial land.

“Complicated,” Leslie labeled the issue, and “standing in the way of semi-conductor expansion.”

The memo, obtained by obtained by The Oregonian/OregonLive through a public records request, suggested having new policies in place by February 2022.

Ultimately, Brown’s administration made no public proposals of the kind Leslie suggested. And last month Intel picked Ohio for a major U.S. expansion, promising to spend at least $20 billion and hire 3,000 for two new factories on 1,000 acres.

The news sounded an alarm in Oregon, where politicians, economic development officials and manufacturers fretted that the state had missed a major opportunity.

Several large semiconductor manufacturers are planning big new factories in other parts of the country, aiming to capitalize on $52 billion in federal funds President Joe Biden is pushing to help support chipmakers in the U.S.

But none appear to have seriously considered Oregon. The biggest piece of industrial land available in the Portland area is just 200 acres. Intel, Taiwan Semiconductor Manufacturing Co. and Samsung all acquired parcels of at least 1,000 acres for new factories – the chip industry calls them fabs – they are building elsewhere in the U.S.

“At this point, the metro area is effectively locked out of the most substantial opportunities associated with the Biden administration’s reshoring initiative. And it’s for one simple reason. We have not made any suitable land available for new, game-changing projects,” Angela Wilhelms, chief executive of Oregon Business & Industry, told Metro Council members at a meeting of the regional governing body last week.

The governor’s office declined this week to say what steps it took to implement the proposals her office outlined last June.

Asked at a legislative preview session last week whether Oregon could have done more to secure Intel’s latest expansion, Brown didn’t answer directly. Instead, she told reporters on the call that Oregon remains central to Intel’s research.

“We’ll continue to partner with them as they growth and thrive in Oregon,” the governor said.

Land Debates Renewed

Land use is a perennially thorny issue in Oregon, which has preserved large tracts of rural farmland just outside its cities. That’s a key amenity and a big part of the region’s identity and agricultural economy.

Any effort to open up a huge new industrial parcel will inevitably run up against land-use protections and the enduring tussle over how, or if, Oregon wants to grow.

In the wake of Intel’s Ohio announcement, though, it’s clear the debate is again ramping up. U.S. Sen Ron Wyden and Portland General Electric CEO Maria Pope are convening a task force of civic and business leaders in hopes of renewing growth in the state’s chip industry.

Companies consider many factors before deciding where to build — available workers, local regulations, tax breaks and government subsidies among them.

Intel has saved nearly $760 million over the past five years through Oregon property tax breaks, for example, and Ohio promised Intel roughly $2 billion in support for its new factories there. That includes an astonishing $600 million outright grant.

Without land, though, Oregon isn’t even in the conversation.

That’s apparent in the memo Brown’s deputy wrote last June, which focused on land availability as a prerequisite for any chip industry expansion. Leslie suggested that the governor was uniquely positioned to navigate the conflicts that arise whenever Oregon considers how to balance its economic growth with its land-use imperatives.

“Nobody’s positioned beside our office to figure out the politics,” Leslie wrote. “Need to evaluate the land use grand bargain.”

Intel announced plans to site a new U.S. factory last March, and Brown met with new Intel CEO Pat Gelsinger in Hillsboro that May. It’s not clear what they discussed or how that meeting informed Leslie’s memo.

But when the governor and her staff met last June to lay out their priorities for Brown’s remaining time in office, “Intel expansion” was listed among 13 top priorities, alongside Portland’s Rose Quarter freeway project, the Interstate 5 Bridge, the Klamath Basin, wildfires and homelessness, among others.

“How do you keep Intel and their universe investing in Oregon,” Leslie asked. “And, how do we create more land availability for that work.”

Her memo suggests the governor could lead an effort to boost Oregon manufacturing by opening up industrial land and creating a research tax credit or another incentive “to signal to (the) manufacturing cluster that we want them.”

Mega-Fabs Seek Mega-Sites

Oregon is the only state in the nation the lists a manufacturer as its largest employer, according to Portland economic research firm ECONorthwest. Intel has 22,000 workers at its Washington County campuses. The Portland area has one of the densest concentrations of fabs anywhere in the nation.

Intel has nearly finished a $3 billion expansion of its D1X research factory in Hillsboro and says it has room for another, similar expansion in the future.

Beyond that, though, it’s not clear whether Intel will build again in Oregon — or whether any other chipmakers will, either. Except for Intel, no one has built an Oregon fab since 1998, and that one never opened.

The new projects getting underway elsewhere, called “mega-fabs” or “gigafabs,” seek enormous parcels of land — 1,000 acres or more. That’s two to four times more acreage than prior generations of chip plants used.

Intel’s Ronler Acres manufacturing campus in Hillsboro, for example, is 530 acres. TSMC’s campus in Camas has 260 acres. Both date to the 1990s.

The latest generation of chip factories seek much larger concentrations of work to take advantage of the efficiency of size. It’s more cost-effective to run utilities to one huge site than several small ones. And they’re more efficient to operate, too.

The biggest industrial site available in the Portland area is about 200 acres, according to Business Oregon, the state’s economic development agency. Intel has 2,000 acres available to it in Ohio.

Business Oregon didn’t talk last year with Intel about its pending expansion, according to spokesperson Nathan Buehler. He said the agency has been working with the University of Oregon on an industrial land inventory and has hired consultants to evaluate its tax incentives, but hasn’t focused specifically on the chip industry.

Competing Priorities

It’s been clear for a long time that Oregon was poised to miss out on the computer chip building boom. And it may be that Intel was determined to expand into a new region of the country, reducing its concentration in the West and Southwest. (News accounts indicate Intel seriously considered building in Wisconsin instead of Ohio.)

Intel’s Ohio news created a political firestorm in Oregon, anyway, as politicians noted the company’s new site near Columbus could someday grow nearly as large as its operations in Washington County.

State Treasurer Tobias Read, who is seeking the Democratic nomination for governor, called Intel’s decision to build in Ohio “a gut punch to Oregon and our economy.”

Republican gubernatorial nominee Jessica Gomez, who runs an electronics manufacturing company in Medford, faulted the regional planning authority Metro for failing to account for big new projects.

“Despite years of discussion in the Legislature and in the high-tech community about the needs and the enormous advantages of foresight and planning, a lack of government leadership caused this tragic missed opportunity,” Gomez said.

Mary Kyle McCurdy is deputy director of 1000 Friends of Oregon, which works to preserve Oregon’s land-use protections. She said any discussion of expanding developable land ought to begin with how the state has allocated existing industrial property.

Data centers and Amazon warehouses have been built on hundreds of acres across the Portland area, spurred on by tax breaks worth tens of millions of dollars a year. Other industrial parcels have gone to shopping centers, McCurdy said, and to the Topgolf entertainment complex along U.S. 26 in Hillsboro.

None of those projects were built on the kind of huge industrial tracts that chipmakers seek. But McCurdy said they suggest that when Oregon says it wants more industrial land for manufacturers, it doesn’t always mean it.

“If this is a real thing, and we want to have a large parcel of industrial land somewhere in Oregon, we have to be able to hold on to it, and not use it for some other use,” McCurdy said. “We need a patient landowner.”

Intel’s Ohio expansion became a focus of a previously scheduled , two-hour meeting of the Metro Council last week to review the state of manufacturing in the Portland area. Council members took no action but heard from business interests, economists and the owner of a Portland technology manufacturer who all pushed for Metro to make job growth and business recruitment a top priority.

Metro is in the early stages of evaluating the urban growth boundary in its tri-county region, an endeavor it undertakes on a six-year cycle. The work, which includes an assessment of available industrial land, is scheduled to wrap up at the end of 2024.

Council members appeared generally receptive to calls for a more active effort to identify developable land. A notable exception was council member Gerritt Rosenthal, who said there’s nowhere in Metro’s boundaries with enough flat land to accommodate 1,000 acres of industrial development.

“I do think the issue of a thousand-acre Intel site is a little bit of a red herring,” Rosenthal said. Instead of computer chips, he urged economic development officials to look instead to forest products or agricultural industries.

Metro should balance any future developmental initiatives, Rosenthal said, with efforts to address affordable housing, transportatOregonion and preserving prime farmland.

“Can we work within our commitment to our land-use model that we have?” Rosenthal asked.

©2022 Advance Local Media LLC. Distributed by Tribune Content Agency, LLC.
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