With sales tax exemption from the Idaho Legislature, will Micron expand its Boise campus?

Could a tax break from the Idaho Legislature entice Micron Technology Inc. into expanding its Boise operations?

House Bill 678, which Gov. Brad Little signed into law March 23, provides a sales tax exemption for building materials used to construct, expand, or modernize semiconductor plants in Idaho. Although the law, known as the Idaho Semiconductors for America Act, goes into effect July 1, it’s tied to passage of new incentives under consideration by Congress that would provide more than $52 billion for domestic computer chip manufacturing and research.

The Idaho Department of Commerce has been courting three companies for new or expansion projects. The companies involved have not been publicly identified, but the projects, if carried out, would involve a capital investment of more than $1.8 billion, according to the department.

“If all three of these qualifying projects were exempted, it would be about $18 million” in state sales tax losses, “in return for $620 million dollars in wage impacts,” Rep. Dustin Manwaring, R-Pocatello, the floor sponsor for the bill, told the House Revenue and Taxation Committee during a hearing last month.

The three projects could bring nearly 1,700 new jobs, according to Idaho Commerce. The largest would bring potentially add 1,474 new jobs with an investment of $1.8 billion. The smaller projects could bring 170 jobs with an investment of $24 million, and 50 jobs with construction costs of $12 million.

Earlier this year, the Triangle Business Journal in Raleigh, North Carolina, reported that Micron was scouting several locations for a $40 billion plant, including Arizona, California, Texas and North Carolina. Boise did not appear to be on the list for that plant.

But a $1.8 billion project would still provide a significant boost to the Boise area’s high-tech industry. So far, Micron isn’t saying whether it plans an Idaho expansion.

“The Idaho Semiconductors for America Act is a positive step taken by Idaho to advance U.S. national security issues by incentivizing advanced manufacturing in the state,” Micron spokesperson Moira Whalen said by email. “The U.S. semiconductor industry is at an inflection point, and we’re encouraged by both the state and federal momentum that is building to bring more leading-edge manufacturing to the U.S.”

Micron CEO Sanjay Mehrotra, in testimony last month before the U.S. Senate Commerce Committee, said approving the $52 billion for computer chips would “kick-start investment in workforce development, R&D, innovation and expansion of manufacturing in the near term.”

Idaho Commerce and the Idaho bill’s sponsors urged passage as a matter of national security. While the U.S. share of global semiconductor manufacturing stood at 37% in 1990, it’s expected to fall to 10% by 2030, Jake Reynolds, business development and operations manager for the department, told the House Revenue and Taxation Committee.

“Semiconductors are the brains of modern electronics and can be found in nearly every electronic device we have today,” Reynolds said. “They’re also in almost every modern industrial commercial military system, weapons system, the Internet and the electrical grid.”

In a hearing before the Senate Local Government & Taxation Committee, Sen. Jim Rice, R-Caldwell, said chips are increasingly made in parts of the world that are unstable.

“We have all been watching what’s been happening in Ukraine,” Rice said. “But that’s not where the problem is that we’re talking about. We see saber rattling from China with regards to Taiwan. That part of the world is more risky than it’s ever been.”

China has long considered Taiwan a breakaway republic that should be reunited with China, much the way Hong Kong was returned to Chinese control in 1997 after more than 150 years of British rule. There have been increasing worries that China might use the Ukraine situation to invade Taiwan.

Micron has chip manufacturing plants in Virginia, China, Taiwan, Singapore, India, Malaysia and Japan, along with Europe. It once produced chips in Boise, but ended production, except for design and testing, in 2009 and turned its Boise campus into the company’s principal R&D center. It sold its Lehi, Utah, plant to Texas Instruments in 2021.

Micron is the fourth-largest semiconductor manufacturer in the world, second in the U.S. after Intel. And it’s the biggest U.S. maker of memory chips.

A shortage of chips for all types of electronics, from smartphones to modern dishwashers, shows the need for increased production, Reynolds told the House committee. The manufacture of more than 11 million vehicles was scrubbed in 2021 because of a lack of chips, according to Statista.

Last fall, Micron said it plans to invest more than $150 billion over the next 10 years to expand and update its memory-manufacturing capacity and to carry out research and development. It could include a possible expansion in the U.S.

The company is on a tear. Last week, Micron reported quarterly sales of $7.8 billion, up 25% from the same quarter a year ago.

As the coronavirus pandemic unfolded in March 2020, the Trump administration was concerned about the reliance by U.S. companies on chips produced by Chinese companies, Reynolds said. U.S. officials wanted Micron, Intel and other large U.S. manufacturers, which had sent their chip manufacturing overseas years ago, to bring it back to the United States.

Both chambers of Congress have passed bills that would provide $52 billion in U.S. computer chip manufacturing, but differences in the two bills must be resolved before a unified bill can be finalized. The competing bills use different approaches in attempting to make the U.S. more competitive with China.

The bills provide $39 billion in grant funding for construction or expansion of microchip fabrication plants, $10.5 billion for research and development, and $2 billion to support the needs of the Department of Defense through research, testing, and workforce development.

Idaho has 12,300 workers employed in the semiconductor industry, which ranks sixth in the nation, Reynolds said. That’s spread out among 50 companies. The average worker earns $135,000 per year, he said.

Micron, with 6,000 workers in the Boise area, is Idaho’s largest semiconductor company and its largest for-profit employer.

Back in 2008, the Idaho Legislature tried to lure French nuclear company Areva to build a plutonium enrichment plant near Idaho Falls. Lawmakers voted to cap the taxable value of the plant at $400 million if Areva invested at least $1 billion within seven years.

That never happened, but Micron later made the necessary investment and had its property taxes capped in 2011.

The new Idaho bill passed 39-22, with nine abstentions in the House and 30-5 in the Senate.

The Idaho Freedom Foundation opposed the bill.

“This is an important industry, but if they’re patriotic they shouldn’t need to come to the state for $18 million to invest in this country,” Fred Birnbaum, the foundation’s legislative director, told the committee.

He noted that Meta, the technology company formerly known as Facebook, is getting a large tax break under a previous law that provides companies an exemption from Idaho’s 6% sales tax if they spend at least $250 million for a new data center and hire at least 30 workers.

Meta plans to spend $800 million on a data center in Kuna, bringing the company a potential sales-tax savings of $48 million.