By Tom Still
MADISON, Wis. – Intel’s decision to build two semiconductor factories northeast of Columbus, Ohio, was disappointing news for Racine County and southeast Wisconsin in the short run but perhaps reassuring for the region in the longer term.
It’s also a tangible, $20-billion sign that the “onshoring” of semiconductor production – critical to all kinds of digital products as well as national defense – is under way.
Observers suspected Intel had all but made up its mind to expand in Ohio when Wisconsin entered the picture with sites in Racine and Kenosha counties, where ample land, utility access, water and sewer infrastructure and transportation options were available. The company made at least three visits to the Racine County community of Mount Pleasant starting in mid-2021, where an existing Tax Incremental Development district established with Foxconn in mind remains in place.
Foxconn is a growing factor in southeast Wisconsin. The Taiwan-based company qualified for about $30 million state tax credits in December 2021 due a combination of jobs created (579) and capital investment during the year. It’s still unclear where Foxconn will leave its footprint over time, but consumer electronics is likely to be involved in some steps.
That brings the conversation back to semiconductor chips, which are used in central processing units that run personal computers as well as automobiles, mobile phones, televisions, washing machines, refrigerators, solar cells and much more. Silicon, germanium and gallium arsenide are the most common materials used to manufacture chips, which conduct electricity more than an insulator but less than a pure conductor. There are four basic kinds of chips, and they’re basically all in short supply right now.
Why? Demand grew 17% between 2019 and 2021 alone, existing factories are running at capacity, inventories are low and the leading producers are mostly outside the United States, with China, Taiwan, South Korea, Singapore, Malaysia and the Philippines high on the list. With shipping vessels lining up outside western ports, the supply chain is stretched.
Meanwhile, vehicle producers and their suppliers are shifting to electric models and the batteries that power them while scrambling to find semiconductors to power traditional vehicles. If you have wondered why car prices, new and used, are so high, semiconductor shortages are a big part of it.
“It’s alarming, really, the situation we’re in as a country, and how urgently we need to move to increase our domestic capacity,” U.S. Commerce Secretary Gina Raimondo told reporters this week.
What does it mean for southeast Wisconsin? Some of the auxiliary jobs planned by Intel could still wind up there; other chip producers may take notice of regional assets; Foxconn will likely need a more reliable supply over time; the Chicago-to-Milwaukee corridor eases transport to and from manufacturing sites; there are strong engineering and computer science schools in the region; and local governments have demonstrated their willingness to work with inquiring companies.
Racine County and Mount Pleasant are a leading example, but so is the city of Kenosha, where the Kenosha Innovation Neighborhood would transform 107 acres that were once the site of a Chrysler Motors engine plant. It was a barren, uptown brownfield for more than 10 years but is now owned by the city and cleaned up for redevelopment.
As of the fall of 2021, Kenosha had 6.6 million square feet of high-bay, industrial space under construction – including 2.2 million square feet of “spec” space.
The United States has long been a leader in the design of semiconductor chips, but ceded its production capacity over time, in part because it was tough to compete with low-cost countries. About 12% of chips sold worldwide were made in the United States in 2019, according to a recent report in Wired magazine, down from 37% in 1990.
Intel’s decision to build in Columbus, within reach of automotive producers in all directions, makes sense in many ways. Still, the company’s long look at southeast Wisconsin may pay dividends over time.
Still is president of the Wisconsin Technology Council. He can be reached at email@example.com.