Intel's $20 billion investment in Ohio promises thousands of jobs, but can the state and company deliver?
Intel’s $20 billion investment just east of Columbus promises thousands of jobs and economic benefits for Central Ohio. It’s a massive commitment from the state and company to deliver on these promises.
Intel has also lagged behind its competitors in recent years but plans to address that with a new strategy, which includes Ohio.
Intel projects that two microchip factories, or fabs as they call them, will create 7,000 construction jobs and 3,000 permanent positions with an average salary of about $130,000. The deal was announced in January, when Governor Mike DeWine called it a major win for Ohio.
“It’s really a game changer; a game changer for our economic future," DeWine said. "We won. They chose Ohio."
Maybe a game changer for the local economy, but it also cost the state a lot- more than $2 billion in total incentives for things like tax breaks and infrastructure upgrades.
But not all deals go according to plan. Speaking at a Columbus Metropolitan Club event, Ohio State adjunct professor and economist William Shkurti raised some questions about the state and Intel’s investment. Shkurti pointed to the competitive and changing nature of the semiconductor market.
“What we have to hope is Intel’s management is on top of that as they seem to be and if they aren’t it could ripple backwards," he said. "The point I’m making here is Intel could be a big win for Ohio, but it’s not guaranteed.”
Shkurti and OSU researcher Fran Stewart, just released a report looking at Intel’s promises and comparing them to similar projects from Ohio’s past and others like it across the country. It ends with proposed questions for future governors, like how they will maintain the promise of more jobs.
“Intel Comes to Ohio: Prospects and Challenges,” compares Intel’s promises to other large manufacturer commitments in other states. It also examines Ohio’s history with other manufacturers like Honda and General Motors.
Shkurti and Stewart show how the GM Lordstown plant employed 10,500 workers at its peak in 1985. It enjoyed a successful 20-year run, but employment “dropped steadily to fewer than 1,500 workers,” before it closed in 2019. Meanwhile, Honda continued to surge and provided higher paying jobs.
But Ohio’s growth in terms of jobs and “per capita” income continued to lag the rest of the nation. As Shkurti and Steward said, “this is not a reflection on GM or Honda,” and that the decline would have been worse without them. But it “underscores the challenges of turning around a “large and complex state economy.”
Those are juxtaposed to the Intel commitment and how all deals could come with big benefits, but don’t always work out.
A statement from Intel says they plan to invest up to $100 million to develop partnerships
with Ohio colleges and the National Science Foundation to, “develop and attract a pipeline of skilled talent in the region.”
Intel is working with local academic partners to develop resources geared towards semiconductor courses, research projects and lab equipment upgrades at different schools.
It’s also worth noting that in recent years Intel fell behind its chip competitors, like Taiwan Semiconductor Manufacturing Company or TSMC, AMD and Samsung. Ohio State professor of business and operation analytics, Elliot Bendoly, said the company had dropped the ball.
“They viewed themselves as the one dominant player and that was a flawed approach to innovation,” he said. “It took a while to figure that out for them, and to recognize it, and change what they’re doing.”
Intel struggled in 2021. The company experienced the lowest growth of the top 25 chip manufacturers at less at .05%, according to Gartner Research. In a report published by Raymond James financial services in February, the company’s stock is down by 30% compared to last year. It also charts downturns in the market in previous years.
Apple severed its partnership with Intel in 2020 over chip size and efficiency concerns. They’re now making their own chips and partnering with other companies.
Intel mass produces chips at 10 nanometers. A nanometer is a measuring unit that defines how large the chip is and its efficiency. Samsung and TSMC produce chips at 5 nanometers which are much smaller. In the world of semiconductors, smaller is better.
However, Bendoly said that Intel has shown recently that it can be flexible in terms of innovation.
“The semiconductor industry is a very large industry," he said. "It’s not all about iPhone, it’s not all about any one product. Intel is a diverse group. It does a lot of things now, maybe things they wouldn’t have considered 10 years ago. Their portfolio is much broader than it ever has been before.”
Intel partnered with IBM last year to advance and innovate semiconductor research, development, and manufacturing. It announced partnerships with Amazon and Qualcomm last year to produce chips for those companies.
At an annual event last summer, Intel announced “IDM 2.0” a strategy committed to chip building. The company will make “five process node transitions over the next four years,” achieving “parity performance” by 2024 and “leadership" by 2025.
Ohio’s two chip fabs are set to begin production in Licking County that same year. County Commissioner Tim Bubb said he is confident that Intel can deliver on its promises, but the proof is in the pudding.
“That’s a fairly quick timetable," Bubb said. "The state of Ohio has made a huge commitment and time will tell how this works out. It’s a brave new world for us here having literally [one of the] state-of-the-art chip making campus facilities in the world. I think we’re still trying to get our arms around that.”
The company has made similar investments elsewhere, including a $20 billion commitment in Arizona to build two new chip fabs. That project broke ground last year.
There’s also a substantial bill in Congress, the CHIPS Act, that would create a $52 billion subsidy for U.S semiconductor manufacturers. If that passes, Intel could invest another $100 billion in Ohio and build a total of eight chip fabs in the county.
Construction on the two fabs is set to start later this year.
Outside of infrastructure, the $2 billion in incentives provided by Ohio will be performance based. If Intel fails to deliver, any disbursed funds would be clawed back.