SIA ISSUE BACKGROUNDERS

State and Local Government Policies to
Keep Manufacturing in the U.S.

Issue: American chipmakers do most of their high wage, high value added work in the U.S., and directly employ over 225,000 people in the U.S. Many foreign governments want the high wage, high growth chip sector, and have adopted policies to attract semiconductor fabrication (fab) facilities. When foreign policies are contrary to WTO rules, the U.S. should seek their elimination. However many foreign initiatives, including research consortiums, workforce education programs, tax holidays, and tax incentives for individuals, are not necessarily inconsistent with WTO rules. State and local policy makers have a vital role to play in meeting this challenge by insuring that their regions are attractive locations for chip manufacturing.

Importance: State economic development agencies are at the front line in the fight to keep manufacturing jobs in America. The President's Council of Advisors on Science and Technology (PCAST) and the National Innovation Initiative have both recommended that the Federal Government better coordinate and assist state and local economic development efforts.

SIA Position/Action: To keep high technology manufacturing in the U.S., state and local governments should:

• Support University Research. States must increase their support for science and engineering at public universities. These programs perform much of the basic research which eventually leads to ever denser, faster, and cheaper semiconductors. The success of a semiconductor company will also greatly depend on the quality of the engineers graduating from near-by universities. Texas and New York attracted state-of-the-art 300 mm wafer plants in part due to major commitments they made to semiconductor research at the their universities, and Georgia and New York have made major investments in their universities' participation in the Semiconductor Focus Center Research Program, which is co-sponsored by the Defense Department and industry.
  
  
• Promote K-12 math and Science Education. A competitive high tech workforce starts in K-12. SIA advocates increased Federal funding to support the math and science programs in No Child Left Behind, and encourages states to effectively implement these programs.
  
  
• Adopt Sound Tax Policies. State and local government tax policies must take into account the capital intensity of the semiconductor industry. Sales and property taxes fall disproportionately on businesses that provide their workers with the expensive tools that drive productivity. To counter foreign tax holidays, states that have succeeded in attracting new facilities or retooling of existing fabs have adopted policies such as sales tax exemptions for machinery and equipment, property tax caps, R&D tax credits, business tax apportionment and ad valorem tax abatements.
  
  
• Speed Regulatory Permitting. Successful states have also emphasized prompt and flexible environmental permitting to respond to the short product life cycles in the chip industry.