Semiconductor chip manufacturing giant Intel Corp. announced plans Friday to build a massive chip manufacturing complex in Licking County, Ohio, just east of Columbus.
Ohio officials say it’s the largest economic development project in the state’s history. The Santa Clara, California-based company is planning a more than $20 billion initial investment with more than 3,000 jobs. The total investment could grow to $100 billion at full buildout.
And yet, it almost happened in Wisconsin, according to local economic development officials.
There is a global shortage of semiconductor chips as demand far exceeds supply, which is contributing to inflation, especially in the auto industry, and Intel needs to expand its production of them, which will include more production in the U.S.
“Today’s investment marks another significant way Intel is leading the effort to restore U.S. semiconductor manufacturing leadership,” Pat Gelsinger, chief executive officer of Intel, said in announcing the company’s plans. “Intel’s actions will help build a more resilient supply chain and ensure reliable access to advanced semiconductors for years to come.
According to local economic development officials in Wisconsin, Intel considered numerous locations to build a new chip manufacturing complex in the United States, including an 871-acre site in Mount Pleasant that included 471 acres of vacant land owned by the village that Foxconn has development rights to, but does not include the area south of that where Foxconn has built four buildings, located northeast of I-94 and 1st Street. The site pitched to Intel also included 400 acres of adjacent land owned by a single property owner that had a contract to sell it for the Intel project.
During an evaluation process that lasted several months, Intel gave the Mount Pleasant site serious consideration, according to local economic development officials.
Intel indicated that the Foxconn site was its second choice, behind the Columbus, Ohio area, according to Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce.
“I can only trust Intel on that,” Sheehy said. “That’s what they told us.”
A spokesperson for Intel today declined to say if the Foxconn-Mount Pleasant site was indeed the company’s second choice for the complex.
“This was a nearly year-long process of scouting a new location for a ‘megasite’ to establish our next major U.S. location,” said Intel spokesperson Krystal Heaton. “This next phase of Intel’s expansion requires a unique site large enough to support future growth and must also offer access to a diverse workforce, robust supplier ecosystem and reliable infrastructure. We had productive conversations with leaders from several states, but ultimately decided that the Licking County, Ohio site (near Columbus) offered the best combination of attributes to meet our needs.”
MMAC is a founding partner of the Milwaukee 7 Economic Development Partnership. M7 was part of the state and local team that led the unsuccessful effort to attract Intel. Others involved included the Wisconsin Economic Development Corp., the Racine County Economic Development Corp. and the village of Mount Pleasant.
[caption id="attachment_541238" align="alignright" width="300"] Claude Lois[/caption]
“We didn’t leave any stone unturned. Our team worked on this process day and night,” said Claude Lois, Mount Pleasant project manager for the tax incremental financing district that includes the Foxconn site. “We believe, when it came down, they were talking to us and we knew one other state. Up until last week we were still in constant communications with them and trying to see whatever we could do to push them our way.”
“(Intel) used the word ‘finalist,’ frequently (to describe its consideration of the Mount Pleasant site),” said Jenny Trick, executive director of the Racine County Economic Development Corp.
Local officials say the fact that they came so close to landing the Intel deal indicates they made a strong pitch and that the Mount Pleasant-Foxconn site has strong attributes as a shovel-ready site with substantial infrastructure in place and an attractive location in between Milwaukee and Chicago.
“We had a site that was second (in the competition for the Intel project),” said Trick. “That’s an amazing thing to say. That we had a site that rose to this company’s consideration on all merits.”
But there’s no silver medal for second place in this competition. Bidding for economic development projects is winner take all.
“It doesn’t always work out as you wish,” Trick said.
Huge missed opportunity
So, here’s what southeastern Wisconsin almost got but missed out on: an initial capital investment of $28 billion, according to Sheehy, an initial 3,000 jobs with an annual average salary of $100,000, perhaps more than 1,000 contractors on the campus at a given time to work on the equipment, a massive supply chain that Intel’s chip manufacturing complexes need nearby (Sheehy says 30 or 50 suppliers may have set up operations in the area) and major plans for future expansion. Intel’s initial complex plans are for what it calls a “two-pack,” (two-building factory complex) which it expects to eventually expand into an “eight-pack,” he said.
Since M7 was formed in 2008, the group has claimed 117 economic development “wins” attracting companies to the area or convincing existing companies to expand in the area. Those 117 “wins” resulted in 24,000 new jobs, more than $1.4 billion in new payroll and about $3.3 billion in capital investment, according to Sheehy.
That’s a good track record, but the Intel project, with an initial capital investment of $28 billion, far exceeds all of those put together. Intel’s capital investment for its facilities is so high because of the extremely expensive equipment that it requires and because the buildings have to be built like cleanrooms, Sheehy said.
The Intel project even dwarfs the $10 billion capital investment that Foxconn had originally promised for what it said would be a 20 million-square-foot television screen manufacturing complex in Mount Pleasant. The company has come nowhere near to living up to that. Like Intel, Foxconn originally said it would have 3,000 jobs initially. Foxconn said it planned to eventually have 13,000 jobs in Mount Pleasant, but its projected average salary was $53,000, just over half of what Intel plans to pay.
Bottom line: Intel would have been a game-changer for southeastern Wisconsin, perhaps even more so than Foxconn’s complex would have, if it actually would have been built as originally proposed.
Sheehy said the Intel deal is the biggest he’s ever pursued and isn’t afraid to admit that losing out on it hurts.
“There’s no question, this stings,” he said. “Nobody wants to come in second.”
Air credits an issue, but not incentives
Intel hasn’t indicated why it chose the Columbus, Ohio, area instead of Mount Pleasant for its next chip manufacturing complex, local officials said.
The state and local governments offered incentive packages, which the company indicated were competitive, Sheehy said. The state incentives were based on current Wisconsin Economic Development Corp. incentive guidelines (already approved by the Legislature) and would not have required special legislation as was necessary for the unprecedented incentive package offered to Foxconn.
“I know from Intel that we had a very competitive incentive offer from the combination of WEDC and the village of Mount Pleasant,” Sheehy said. He declined to disclose details about what incentives were offered to Intel.
A WEDC spokesman also declined to disclose the incentive package that the state offered Intel, citing the organization’s practice of not discussing deals that have not been completed.
The agency’s enterprise zone tax credit program offers companies a credit of up to 7% on wages paid in excess of $30,000. With 3,000 jobs at an average salary of $100,000, the job creation incentive for Intel could have been worth $14.7 million annually. The credit can be awarded for up to 12 years, potentially making it worth $176 million. The program also offers a 10% credit for significant capital expenditures. With a planned investment of at least $20 billion, that incentive could have been worth $2 billion before accounting for the full buildout of the Intel campus. Companies can also receive credits for 100% of certain training costs and up to 1% of supply chain spending in the state.
Lois said Mount Pleasant did not present a specific dollar figure as an incentive offer to Intel, but the village did indicate it would be able to provide an incentive to the company via a rebate of a portion of its property taxes on a pay-as-you-go basis, rather than providing a lump sum up front.
“We never really gave them a clear dollar (amount), because we couldn’t. We didn’t know what their assessed value was going to be,” Lois said.
He also said the village did not offer a specific amount for what percent the property tax rebate would be.
While officials say Intel appeared satisfied with their incentive package, one concern they say that the company did raise was uncertainty over the ability to obtain air credits in the future for its anticipated expansion. Racine County lies within an EPA air pollution nonattainment zone. The Columbus, Ohio area, including the site chosen by Intel, is considered to be in attainment for the EPA’s ozone standard, according to an EPA spokesman.
“Using air quality data, EPA designates whether an area meets air quality standards and is in attainment of the standard or doesn’t meet them and is considered a nonattainment area,” an EPA spokesman said in a statement.
Whether the area around the Foxconn site meets ozone standards has previously been the subject of controversy and lawsuits. In late 2017, the EPA planned to designate much of southeastern Wisconsin as having met a new, more stringent standard, but the agency reversed course in 2018 and excluded Racine County from the nonattainment areas. The change led to lawsuits from the state of Illinois and environmental groups like Clean Wisconsin, who argued the agency did not have a basis for the decision and obtained emails from EPA scientists "in disbelief" over the decision. In 2020, a federal appeals court allowed the EPA to take a second look at its designations and the eastern half of the county was put under a nonattainment designation.
That means in order for a new operation like Intel to establish operations in a nonattainment area like Racine County and gain permission to release significant air emissions there, it would need to obtain air emission credits, which could come from another entity in the same nonattainment zone that had ceased or reduced its air emissions.
“There are several options for obtaining emissions credits, and one of those options is to obtain those credits from a nearby existing source in the same nonattainment area that has shut down or reduced their emissions for the particular pollutant that is being offset,” the EPA spokesman said.
That isn’t necessary for an operation in an area like Columbus, Ohio, that is in attainment with the EPA’s ozone standard.
Officials had lined up air credits from Milwaukee-based WEC Energy Group, made available by shutting down, or planning to shut down, coal power plants, which could have been used for Intel’s initial operations, Sheehy said. State and local officials were confident more air credits could have been secured for future Intel expansions, but that uncertainty was a concern of the company, which has run into air credit issues for other operations, he said.
"I don't know if it was the defining issue (for Intel choosing Ohio instead of Mount Pleasant),” Sheehy said.
“The company was reluctant to tell us too much (about why it chose Ohio instead of Mount Pleasant),” Trick said. “We hope to have more conversations with the company ... to have a better understanding (of its decision).”
The recruitment of Intel by M7 and WEDC began in April. Intel put out an RFP seeking a site for a chip manufacturing complex, and M7 and WEDC also heard about the project from their network, Sheehy said. M7 was “on point” for the recruitment effort, he said. Officials from Mount Pleasant and the Racine County Economic Development Corp. were also brought in to the effort when M7 and WEDC identified the Foxconn site and adjacent land as the best site to pitch to Intel.
In addition to M7, WEDC and local officials, Gov. Tony Evers was also directly involved in multiple conversations with Intel decision-makers, Sheehy said.
Officials from the state Department of Natural Resources and WEC Energy Group also helped provide information for the company, he said.
During the 10-month process, M7 hosted three site visits from Intel personnel, including the company’s top decision maker and chief human resources officer, Sheehy said. Those visits included a tour of the Foxconn site and its surroundings, plus a tour of the greater Milwaukee area starting with a visit to the Foley & Lardner offices at the top of the U.S. Bank Center in downtown Milwaukee for a bird’s eye view of the region, and then drives to different areas including Racine and Kenosha, the north shore and Waukesha County.
“A wide-ranging tour … looking at potential housing options … (and to provide Intel) an understanding of the talent pool and the universities here … the whole spectrum of the quality of life,” Sheehy said.
The team pitching to Intel also toured the company’s chip manufacturing complex in Chandler, Arizona, which is similar to the new facility the company was thinking about building in Mount Pleasant, but will instead build near Columbus, Ohio.
A massive amount of information was provided to Intel about the readiness of the Foxconn site and the adjacent property, including information about infrastructure, utility capacity, the local workforce, air permitting, operating conditions, etc., Sheehy said.
“This was an exhaustive look at our attributes and what we had in place,” he said.
While extremely disappointed to lose out on the Intel opportunity, Sheehy said the fact that the bid for the Mount Pleasant-Foxconn site was so close indicates that the site has a tremendous amount of value and could be successful in a future pitch for a major economic development project.
The massive investment in road improvements, sewer and water infrastructure, electrical service upgrades and the displacement of homeowners to prepare the site for Foxconn has been much criticized as Foxconn has fallen far short of its original plans for its Mount Pleasant campus. But the nature of the site, its size, infrastructure and its location along I-94 between Milwaukee and Chicago provide local economic development officials with something they’ve never had before: a huge, prime, shovel-ready location with all of the necessary infrastructure to pitch for large economic development projects.
[caption id="attachment_523718" align="alignright" width="300"] Tim Sheehy[/caption]
“If we can get to the final in a mega-project like this, there are lots of other opportunities for which this land, infrastructure, incentive and workforce package is going to sell well to,” Sheehy said. “The site down there takes all of the guesswork out of somebody putting a plant expansion down there. The pads have been put in place. The soil has been tested. The water infrastructure, the sewer infrastructure. The roads that are there, both in terms of the freeway being improved, as well as the access roads. The energy infrastructure down there. All of those are things that very few sites in the United States have at the magnitude in which we have them. There’s no question when (Intel) got off that site, they said ‘this is A-plus.’ They’re (looking at sites) all over the country. There are few sites that are prepared like this.”
Those site improvements were done mostly in hopes of seeing the Foxconn project reach its full potential. While the Foxconn operation hasn’t nearly reached its original proposal, the site improvements done for Foxconn could eventually attract a significant economic development.
“Absent all of that work for Foxconn, nobody with projects like (the Intel project) would be looking at that site,” Sheehy said. “So, the preparation that went for Foxconn, which admittedly hasn’t totally paid out there, set us up (to compete) for this Intel project, and I think it’s going to help us land something in the near future.”
Foxconn has only built four buildings at its Mount Pleasant site, a far cry from the $10 billion, 20 million-square-foot campus it originally said it planned to build there.
The Intel pitch did not encompass any of the existing Foxconn buildings, Sheehy said. Even if Intel would have chosen its site, Foxconn would have maintained its existing Mount Pleasant operations.
Originally planned to make huge television screens, Foxconn then considered plans to make several different products in Mount Pleasant, including electric vehicles, though it chose a facility in Ohio instead for that product.
Foxconn is now manufacturing servers and server racks at its Mount Pleasant campus.
In 2021, for the first time, Foxconn qualified for tax credits from the state of Wisconsin. The company qualified for nearly $30 million in tax credits, including more than $2 million for creating 579 jobs and nearly $27 million for making a capital investment of $266 million in its Mount Pleasant complex during the year.
The company’s original deal, approved by Gov. Scott Walker and signed into law in 2017, offered it up to $2.85 billion in tax incentives if it created 13,000 jobs and made a capital investment of $10 billion.
Gov. Tony Evers and WEDC said that deal was null and void because Foxconn wasn’t making large television screens as indicated in the original deal. In 2021 they negotiated a new incentive deal with the company, worth up to $80 million if the company hits certain hiring and investment targets. Specifically, the new deal requires the company to hire 1,454 qualified workers at an average wage of $53,875 and invest $672 million in capital spending.
Mount Pleasant and Racine County agreed to provide $764 million in tax incremental financing for the Foxconn project, including funds for land acquisition and infrastructure upgrades.
The state’s original deal with Foxconn also allocated $250 million, which included $160 million in federal funds, to complete the widening and improvement of I-94 between Milwaukee and Illinois.
In addition, WEC Energy Group invested in power infrastructure upgrades to serve the Foxconn site.
Despite coming up short of its original grand plans, Foxconn is now the largest property taxpayer in Racine County, Lois said. Its property has an assessed value of $520 million. It will pay $9.6 million in property taxes to the TIF district this year and paid a $7.3 million annual special assessment in December to cover land acquisition costs, he said. (Foxconn will pay the special assessment for 20 years and also made an up-front $60 million payment to the village for land acquisition).
As part of its deal with the village, in 2024 Foxconn will be required to pay property taxes based on a $1.4 billion assessed property value (regardless of the property’s actual value), a huge increase from last year’s $520 million assessment. Those payments will enable the village to cover its debt on the TIF district, including the costs for the infrastructure that was extended to the Foxconn site, Lois said.
So far, “(Foxconn is) meeting all of the requirements of the development agreement (with Mount Pleasant),” he said. “They’re in compliance, they’re making their payments.
“From the village and county standpoint, we’re trying to assist them and help them in any way we can. Is it the original vision? No, it’s not. Has the market changed? It has. Is Foxconn adapting? I think they are as best they can. I know they are trying to hire as many people as they can. They are filling the facilities that they have. The challenge is always: what’s the market today? The technology market, it changes daily.”
[caption id="attachment_535417" align="alignnone" width="1280"] Foxconn's Mount Pleasant campus in August 2021. Photo credit: Curtis Waltz, aerialscapes.com[/caption]
Trick said Foxconn was a partner in the bid for the Intel project and was very supportive of it. The tax incremental financing district was always expected to have additional companies besides Foxconn, she said.
“When we had this opportunity, we made (Foxconn) aware of (the Intel project) and indicated we were going to run after this prospect hard, and they cheered us on,” Trick said. “This would fit nicely into a technology business park, which was envisioned.”
While disappointed to lose out on the Intel deal, state and local officials said they wanted to congratulate Ohio and said they were glad the project landed in the Midwest.
“This type of manufacturing must happen in the United States, and it’s great that it’s happening in the Midwest,” said Missy Hughes, secretary and CEO of WEDC. “In Wisconsin, our takeaway is that investing in infrastructure gets us in the game with world-class companies, but investing in our communities, our education system, and our workforce … is what will win the day.”
Now state and local economic development officials have to dust themselves off, lick their wounds and get to work on pursuing the next opportunity.
“There’s no crying in economic development,” Sheehy said. “As of today, we’re back in the game again looking at other potential users. We’ve already reached out to multiple site consultants that we look at, where they have large projects, so they know that this property is now, in a sense, back on the market.
“I think once the word gets out that we were an also-ran (for the Intel deal) we’re going to get other people to say, ‘What did Intel see there that we’re not seeing?’ We want this to become more visible. Then we’re right back at it looking at other kind of adjacent types of industries and users. It could be advanced manufacturing, it could be batteries, it could be electric vehicles, pharmaceutics. There’s all sorts of adjacent industries that would have similar needs in terms of the space, the infrastructure, the ability to stand up a building really quickly because of what’s already been done (to the site). So, there are, I think, lots of opportunities. I would be shocked if we’re having this conversation a couple of years from now and those attributes haven’t matriculated into a very large project.”
[caption id="attachment_541236" align="alignright" width="300"] Jenny Trick[/caption]
“I think this opportunity has given this site a little bit more recognition,” Trick said. “With the kind of company like Intel looking at this, I know that other companies will look at this site as well. The site selectors that have been involved directly and marginally around this project are very well aware of the site and now that they know of its existence, I think there’s going to be more activity. We’re already starting to work on a couple of different things. We certainly don’t want to sit idly by. We want to make sure that we are moving forward with some hot recruitment opportunities, so we are pursuing them actively with Milwaukee 7.”
“We now know -- we were pretty sure before, but we now clearly know -- we can compete with anybody,” Lois said. “Our site we have here is an impressive piece of property. We’re looking forward to the next opportunity.”
BizTimes Milwaukee associated editor Arthur Thomas contributed to this report.Listen to a discussion about this report on the BizTimes MKE Podcast's Weekly debrief.