Virginia is repackaging a 5-year-old economic development incentive package for Micron Technology Inc. to bring a new line of semiconductor chip manufacturing from Taiwan to its production plant in Manassas.
The package, which a General Assembly oversight commission approved last month, includes about $46 million in unspent financial incentives from an agreement with the Idaho-based semiconductor chip company in 2018. It included $70 million in state money for a $3 billion expansion of the plant and creation of 1,106 jobs.
Virginia agreed to the incentive package then in part to prevent the company from moving the plant and the 1,230 jobs it already supported.
Gov. Glenn Youngkin‘s administration confirmed the new package, which it said would be similar in size to the current incentive deal but would rely primarily on state money already in escrow but not yet spent. Administration officials did not specify how many jobs would be created under the package for the estimated $2 billion investment.
Under the previous agreement, Micron has exceeded performance targets for capital investment and payroll but has lagged behind in creating new jobs. It was 403 jobs short of the cumulative target through the middle of last year, a gap of about 73%. Company and state officials attribute the shortfall to the fallout from the COVID-19 pandemic, which began in early 2020 and disrupted critical manufacturing supply lines across the world, especially for semiconductor chips manufactured primarily in Asia for uses that include automobiles made in the U.S.
“To adjust to market conditions, Micron reduced our global workforce and slowed hiring,” a company spokesperson said Friday. “Nevertheless, we maintained a focus on providing legacy memory chips from our semiconductor manufacturing facility in Manassas, Va., to our customers for a range of applications.”
Micron said it is “on track” to achieve its promise of $2.98 billion in capital investment, with more than $2.3 billion spent through the middle of last year. The company said it has also completed a 110,000-square-foot “clean room” for advanced manufacturing, continued to partner with Northern Virginia Community College to convert interns to full-time technicians at the plant, and awarded $4 million in community grants for K-12 and higher education.
“Micron has met and exceeded the city’s expectations with regard to its ongoing growth and expansion,” said Patrick Small, director of economic development in Manassas, in an email statement. “The company remains one of the city’s top employers, its largest taxpayer, and its largest utility customer.”
“Thanks to the continued operation of this leading producer of semiconductors, the city boasts one of the higher advanced manufacturing wages and weekly wages in the commonwealth,” he added.
Micron confirmed it has submitted an application to the U.S. Department of Commerce for federal grants under the CHIPS and Science Act. Congress passed it, and President Joe Biden signed it into law in August 2022, to revive domestic manufacturing of semiconductor chips in the U.S. and reduce the economy’s reliance on global supply chains to deliver them.
The company said the grants would allow it to expand and modernize production of DRAM — dynamic random-access memory — computer chips at the plant in Manassas. The “requested level of federal CHIPS Act grants and tax credits” is needed “to enable this planned capacity expansion,” the spokesperson said.
Senator calls investment ‘critical’
For Virginia, the proposed expansion would bolster the plant’s manufacturing operation and workforce with a new line of memory chips that administration officials expect to last 15 to 20 years, or until the next advancement in technology.
“From my perspective, it’s a critical investment,” said Sen. Jeremy McPike, D-Prince William, whose old district included the plant and whose new one sits across the street.
The new project also gives the state a chance to rewrite an incentive package that required the company to meet job, payroll and capital investment targets, but provided incentive funds up-front instead of after the jobs had been created.
When then-Gov. Ralph Northam’s administration agreed to the package in August 2018, it was trying to prevent Micron from leaving the state for another that offered larger financial incentives for private investment and new jobs.
Months after signing the deal, Northam and legislators on the bipartisan Major Employment Investment Project Approval Commission, known as MEI, fashioned a different kind of incentive package for Amazon to build its East Coast headquarters in Arlington County.
That $1.85 billion package included $550 million in direct incentives for Amazon to create 25,000 jobs and invest $2.5 billion in the Crystal City neighborhood — all to be paid after the jobs were filled and began generating income tax revenues for the state.
The package also included a commitment to invest $1.1 billion in state colleges and universities to educate the future workforce for high-technology industries.
Amazon has failed to produce all of the jobs it promised more than five years ago, with the pandemic turning the notion of an office headquarters upside down. As a result, the Seattle-based retail giant has received significantly less in state and local incentives than originally forecast.
‘The difference ... is COVID’
In Micron’s case, “the difference between 2018 and now is COVID, and how it affected the supply chains,” a Youngkin administration official said on condition of anonymity.
The Richmond Times-Dispatch reviewed reports that the company submitted to the Virginia Economic Development Partnership over the past five years, obtained under the Virginia Freedom of Information Act. Those reports showed Micron exceeding performance targets for new jobs, payroll and capital investment in 2019 and 2020, which allowed it to apply credits for surpassing them to offset shortfalls in future years under the 2018 agreement.
The first sign of trouble came in Fiscal Year 2021 — July 1, 2020, through June 30, 2021 — in the heart of the pandemic. The company lost 39 jobs instead of creating 213. In Fiscal Year 2022, it created 108 fewer jobs than expected during the year and lagged the cumulative target by 138 jobs.
The bottom fell out in the last fiscal year, when the company cut 265 jobs and lagged behind the agreed cumulative target by 403 jobs. Still, it significantly exceeded the targets for capital investment and payroll. The next performance report for the current fiscal year is due in November.
“We’ve all seen the investments that have been made,” McPike said. “It’s not like there has been empty shovels in the ground.”
Sen. Danica Roem, D-Prince William, who now represents the Micron plant, supported the 2018 expansion and the proposed new one, although she said neither the company nor the Youngkin administration has briefed her on the project. She said the plant supports well-paying, full-time jobs that allow Manassas and Prince William residents to work near where they live, instead of commuting within the broader Washington, D.C., region.
However, Roem conditioned her support on requiring that Micron create the jobs before it receives the state money.
“If we’re going to incentivize corporations ... they’ve got to put up the jobs first,” she said.
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Sen. Mark Warner, D-Va., speaks at the Micron Technology semiconductor plant in Manassas in 2021. Sitting behind him are Micron President and CEO Sanjay Mehrotra, left, and U.S. Secretary of Commerce Gina Raimondo. Warner was one of the authors of the CHIPS and Science Act that Congress passed in 2022 with $52 billion to invest in domestic manufacturing of essential semiconductor chips.