$1.3B in ‘Direct Cash Incentives’ Lured Intel to Build in Ohio
Ohio offered Intel $1.29 billion in “direct cash incentives” to land the chipmaker’s commitment to invest $20 billion in building two semiconductor fabs on a 1,000-acre campus in Licking County, just east of Columbus (see 2201210041), Ohio Department of Development Director Lydia Mihalik told a virtual media briefing Friday. The project is expected to add $2.8 billion to Ohio’s annual “gross state product” when it’s fully operational in 2025, said Mihalik, suggesting strongly that the terms of Ohio's offer to Intel don’t yet have the required regulatory or legislative approvals.
The direct cash incentives include a $600 million “grant” for "onshoring manufacturing operations,” plus a $691 million state “investment in the local community” for infrastructure improvements germane to operating the fabs, said Mihalik. The $600 million “onshoring incentive grant,” $300 million for each of the two fabs, “is going to help offset the costs for the company, given that really building a semiconductor manufacturing plant in the United States costs as much as 20 to 30% more" than those in Asian markets, she said.
The onshoring incentive grant is “performance-based,” said Mihalik. If Intel “fails to deliver on their commitments -- which we’re very confident that they won’t -- they will not be eligible for the grant, and so we would have a discussion then, of course, of the disbursed funds that would be clawed back,” she said. The $691 million in local infrastructure investment includes $101.2 million for “water and waste water capacity upgrades,” plus $290 million in road improvements and $300 million for a “water reclamation facility,” she said. Ohio estimates that for every 6 cents that Ohio invests in the direct cash incentives, “Intel invests at least a dollar,” she said.
Ohio also will see to it that Intel benefits from “an extended job creation tax credit” (JCTC) program, said Mihalik. The 30-year program is performance-based “and has an estimated value of about $650 million,” she said. “Intel will provide an annual report that details the project’s status as it relates to job creation.”
The annual report will include “data points such as full-time employees, payroll, income tax revenue and other information,” she said. She was unable to provide the specific performance-based benchmarks Intel will be required to meet to qualify for the direct cash incentives or the job creation tax credits. The company has said the project will create 7,000 construction jobs through the course of the build, and generate a full-time Intel workforce of 3,000 employees at annual salaries averaging $130,000, plus benefits.
State tax authorities “will obviously have say over the job creation tax credit,” said Mihalik, when asked if the incentives package has the required regulatory and legislative approvals. "In terms of the direct cash incentives, we’ll be working with our partners in the legislature to bring those to fruition.” The Ohio Tax Credit Authority (TCA) approves all applications for the JCTC program, and customarily meets monthly on the last Monday of each month, said a Department of Development spokesperson. "When an JCTC application is submitted to the TCA for review and approval, it will appear on a meeting agenda" that's posted publicly on the Thursday before the meeting, he said.
Ohio decided to offer Intel the incentives because it was "presented with an historic opportunity to take the lead in reestablishing America’s dominance as the maker of semiconductors,” said Mihalik. “Decades of offshoring the manufacturing of chips” to Asia left the U.S. “vulnerable to supply chain disruptions,” she said. “Intel’s technology, which is built in America, is essential to key Ohio sectors,” including automotive, advanced mobility, aerospace, aviation, healthcare and consumer goods, she said: “This deal will establish Ohio as the world center of modern manufacturing.”
The U.S. needs to “make more products in America, and we want to make them here in Ohio, so that we’re no longer held hostage by disruptions in the global supply chain,” said Mihalik. “When you look at what we’re giving Intel, and compare it to what we’re getting in return, some may wonder if it’s worth it, and the answer is yes.”