Ohio incentives for Intel chip plant will top $2B, including $600M 'onshoring grant'

Intel formally announced plans for the factories, called fabs on January 21. They will employ 3,000 workers at an average salary of $135,000.

An Intel logo is seen at the company's offices in Petah Tikva, near Tel Aviv October 24, 2011. (photo credit: NIR ELIAS / REUTERS)
An Intel logo is seen at the company's offices in Petah Tikva, near Tel Aviv October 24, 2011.
(photo credit: NIR ELIAS / REUTERS)

Ohio's biggest economic development project in history means the state is ponying up its biggest incentive package.

The state laid out more than $2 billion in incentives that it will provide to Intel, which announced a week ago that it will invest $20 billion in building two factories, called fabs, in Licking County to make semiconductors.

On top of the state's incentives, JobsOhio, the state's economic development arm, will kick in $150 million in economic development and workforce grants and the city of New Albany said it will offer a 30-year, 100% property tax abatement on the buildings that Intel constructs in the city's business park.

"As we've all seen over the past few years, we've got to make more products here in America, and we want to make them here in Ohio so that we're no longer held hostage by disruptions in the global supply chain," Lydia Mihalik, director of the state's Department of Development, said Friday at a news conference where she detailed the incentives. "When you look at what we're giving Intel to what we're getting in return some may wonder if its worth it, the answer is yes."

Intel formally announced plans for the factories, called fabs on January 21. They will employ 3,000 workers at an average salary of $135,000.

U.S. chipmaker Intel Corp's logo is seen on their ''smart building'' in Petah Tikva, near Tel Aviv (credit: REUTERS)U.S. chipmaker Intel Corp's logo is seen on their ''smart building'' in Petah Tikva, near Tel Aviv (credit: REUTERS)

On top of that, the project is expected to create 7,000 construction jobs and 10,000 indirect jobs.

The state's commitment is broken into three parts: $600 million to Intel that reflects the cost of developing chip factories in America; $691 million in infrastructure improvements in the region; and $650 million over 30 years in income tax incentives based on the number of workers Intel hires.

"Ohio has been presented with a historical opportunity to take the lead in re-establishing America's dominance in making semiconductors,'' Mihalik said.

Mihalik called the $600 million an onshoring grant that is intended to offset Intel's cost of building the plants in America where costs can be 20% to 30% higher than in Asia.

The grant is $300 million per plant with a goal of completing the plants by 2025.

Mihalik said the grant is performance-based, meaning that if Intel doesn't live up to its promise, the state will work to recover the money.

Of the $691 million in local infrastructure improvements, $300 million will be spent on a water reclamation facility, $290 million on road work and $101.2 million to build out water and wastewater capacity upgrades.

The state income tax incentives will have to be approved by the Ohio Tax Credit Authority while state legislators will have to sign off on the grants and infrastructure money.

In the early stages of wooing Intel last summer, Ohio changed state law to sweeten the potential tax breaks for what are classified as "megaprojects" like what Intel wants to do.

"Intel's investment in Ohio is unprecedented in size and importance for America as it adds a new industry and generations of potential for Ohioans," JobsOhio President and CEO J.P. Nauseef said in a statement.

As for New Albany, the value of the property tax abatement will depend on the value of the buildings that Intel constructs on the site.

The abatement is consistent with what New Albany has offered to other companies that have located in the park the past 12 years. The difference is that the abatement will remain in effect for 30 years under the new mega-projects legislation.

New Albany will share income tax revenue from workers at the park with local schools and communities to make up for some of the property tax abatement.

Global supply chain problems during the pandemic have created a massive shortage of chips, the brains that run everything from cell phones to cars to appliances to industrial and medical equipment.

Currently, 12% of the world's chips are made in the US, down from 37% in the 1990s, according to industry officials. About 80% are made in Asia.

Chips are an integrated circuit or small wafer of semiconductor material embedded with integrated circuitry.

As a result of the shortage, semiconductor companies have started the long process of developing new US sources of chips. The process figures to take several years before the plants would be up and running.

In addition to the local and state incentives, Intel figures to be a big winner assuming Congress passes the funding for the CHIPS Act, a $52 billion proposal meant to bring back chip production to the United States.

CHIPS was approved in January 2021 as part of the most recent National Defense Authorization Act, but without funding.

In June, the Senate passed the Innovation and Competition Act. The House is expected to take up the legislation in February.

Intel has said eventually, there could be eight plants at the site with 10,000 workers, and that the location could become the largest semiconductor operation in the world, meaning that Intel could be eligible for additional tax incentives in the future.

The plants will be built on 3,190 acres that New Albany is annexing from Jersey Township in Licking County.

Intel plans to use nearly 1,000 acres and has an option on another 500. About 250 acres also have been set aside for Intel suppliers.