By Brandon Martin
With China currently outpacing the U.S. in semiconductor manufacturing, the pressing need for the U.S. to catch up has led to two proposed bills by Sen. Mark Warner, D-Alexandria, which could place Southwest and Southside Virginia smack dab in the middle of the race for semiconductor supremacy.
“I would love to see new chip manufacturing facilities, they call them FABs, I would love to see one in southwest Virginia,” Warner said.
As small as semiconductors are, they have a gigantic impact on the way modern society functions. For the unfamiliar, semiconductors are essentially microchips, which help power electronic devices used for communications, computing, healthcare, military systems, transportation, clean energy, and a variety of other applications.
When discussing his proposals, Warner noted that Southside and the New River Valley could be ideal homes for new semiconductor manufacturers.
His first bill which could help make this a reality is the United States Innovation and Competition Act. If approved, his proposal would dramatically increase the level of funding authorized to go to the National Science Foundation and the Department of Energy.
In addition, appropriated funds of $52 billion would go directly towards semiconductors.
As the lead Democrat on the issue, Warner said he is pushing for the funds to be emergency appropriated.
“Semiconductors and microelectronics are the heart and soul of every device that we operate, from our cell phones to our televisions to our cars to our aircraft and planes,” he said. “They literally go into everything.”
Over the course of two decades, Warner said the United States has gone from producing 37 percent of the world’s semiconductors to 12 percent.
“We’ve seen China literally flip the numbers and go from low single digits to mid-30s in terms of world production,” he added. “We see at this moment in time, literally not a single new semiconductor factory” otherwise known as foundries or fabrication facilities (FABs) “being built in America.”
Warner said that Virginia had two foundries at one time, but only the facility in Manassas is still operational.
“Our CHIPs bill, the $52 billion, will commit $39 billion to help build 8-10 of these new foundries in America over the next 5-7 years,” Warner said. “It will also commit an additional $12-13 billion in research dollars that will go towards increased design.”
According to Warner, the U.S. still has an advantage over China in the machining equipment and packaging necessary for the production of semiconductors.
“They are all areas where America has a lead but unless we invest, we won’t be able to maintain that lead,” he said. “While $52 billion in emergency appropriations is a lot of money, to put that in comparison to our competitors, if you look at China itself, China has committed $150 billion.”
South Korea also is making large investments in the semiconductor industry, committing $350 billion.
Warner said that Taiwan currently produces 63 percent of all of the semiconductors in the world. Given their lead in the industry and growing tensions with neighboring China, Warner said the U.S. is trying to have some established Taiwanese companies build factories in the states.
“I hope Virginia will be one of the states to compete for these new facilities,” Warner said. “This is critically important for our national security, our competitiveness and my hope is we will broadly pass this legislation next week.”
There are numerous factors that make Virginia an ideal spot for a new foundry, he added.
“You need good labor. We’ve got it. You need a pro-business environment. We’ve got it. You need access to water and in many areas of southwest Virginia, even with some of the abandoned mining, there is good access to water,” Warner said. “We’ve already shown that we can build FABs in Virginia. I think Virginia and Southwest Virginia, particularly with the ability to leverage off of Virginia Tech, is a great opportunity.”
With $12-13 billion going towards research and development, Warner said universities like Virginia Tech and the surrounding areas could take advantage of the federal funds.
There is one big problem with constructing a new foundry.
“These FABs cost roughly $12-15 billion to build,” Warner said, noting that the federal investment when broken down across the 8-10 facilities would only amount to about a third of the costs.
Warner said the gap in funding would be left to private investors, but the federal government could also help in this aspect if his second bill is also passed, the Rural Jobs Act.
“That takes a very successful program of New Market Tax Credits but sets aside $1 billion of those New Market Tax Credits for communities that are less than 50,000 in population,” Warner said. “That would benefit wide swaths of Virginia. The New Market program has been very successful.”
In the past, Warner said the program has experienced a large number of applications which typically ended up offering tax credits to suburban and urban communities.
“By setting aside $1 billion of these tax credits for rural communities, that will disproportionately help Southwest, Southside, the Valley and the Eastern Shore,” Warner said. “My feeling is that we can ensure that as the economy reopens post-COVID that the job growth will not just take place in the (Interstate) 95-64 corridor, but other parts of Virginia will be included.”
Martinsville and Henry County have previously had success in using the New Market Tax Credit program to generate economic development in the area.
Monogram Food Solutions, LLC, has benefited from the program twice. First, Monogram Snacks Martinsville, LLC, a wholly owned subsidiary of Monogram Food Solutions, LLC, received a New Markets Tax Credit allocation of $8 million from Rural Development Partners as part of a financing package for a major expansion project at its Martinsville production plant in 2015, according to Rural Development Partners. The overall expansion cost $61.7 million, added 56,000 square feet and renovated space in the original production plant.
Monogram also benefited from the program again in 2017 for the design, construction and installation of state-of-the-art clean energy generation technology into an anaerobic digestion facility. The company was the 2017 American Biogas Council Biogas Industry Award Winner for Project of the Year. With an unemployment rate of 9.4 percent at the time, the project created five new full-time permanent jobs with above average wages and retained over 471 additional jobs at the facility. More than 50 percent of the new jobs were filled by low-income persons or residents of the surrounding low-income community.
Henry County, in partnership with the Martinsville-Henry County Economic Development Corporation, also secured funding in 2017 through the New Market Tax Credits to construct the Commonwealth Centre for Advanced Training (CCAT) in the Commonwealth Crossing Business Centre.
The New Markets transaction included a $5 million grant from the Harvest Foundation and funding from the Tobacco Commission and the Virginia Economic Development Partnership. The funds were used to help leverage an additional $2.7 million for construction.
“Without both the Harvest Foundation Grant and the ability to leverage available funds through the use of the NMTC program, CCBC would have remained only a business center promising to support new companies once they complete site selection,” said Mark Heath, director of the EDC, at the time. “CCAT demonstrates our commitment to those companies and to developing our workforce to meet their specific needs.”
With past success in the New Market Tax Credit program and renewed interest by Warner in creating rural jobs and competing in microchip manufacturing, MHC could be passed the baton as the U.S. prepares to take the lead from China in the 21st Century semiconductor race.