Oregon governor candidates debate chip industry and business climate: ‘How do we keep the next Intel from moving?’

Intel’s decision to build a multibillion-dollar manufacturing campus in Ohio set off alarm bells in Oregon at the beginning of the year. Now that decision figures to be an issue in November’s gubernatorial election.

The state has one of the densest concentrations of semiconductor jobs in the nation, but Oregon is poised to miss out on a barrage of new computer chip factories planned in states from Arizona to Indiana to New York. Manufacturers are responding to a global chip shortage, which has impeded the production of everything from cars to appliances.

Oregon’s three leading gubernatorial candidates addressed the issue in their first debate last month, agreeing that the state’s next governor must be more engaged with the chip industry. But they have stark differences on how they perceive Oregon’s business climate.

Democrat Tina Kotek promised to prioritize workforce development, independent candidate Betsy Johnson rebuked the state for neglecting Intel, and Republican Christine Drazen lamented the state’s regulatory and tax climate.

“How do we keep the next Intel from moving?” Darzan asked.

The severe shortage of industrial land in the Portland area is a central issue for the region’s semiconductor industry. Big chipmakers want plots of at least 1,000 acres for their clusters of “megafabs.” In Oregon, the largest parcel available near Portland is just 200 acres.

A new task force of government and business leaders is exploring other potential issues, too, including the state’s regulatory climate, workforce development, tax structure and incentives.

The task force plans to release its first report later this month, hoping to position Oregon to pursue a share of the $280 billion in new federal funding for scientific research and chips manufacturing.

In their recent debate, none of the candidates directly took on the thorny issue of Oregon’s land-use policy. The state zealously protects rural property beyond cities’ urban growth boundary, preserving farms and forests while constraining land for housing and business development.

Instead, they focused on other shortcomings or opportunities facing Oregon.

“Oregon makes things. I want to make more things here. Manufacturing is key and high-tech manufacturing is a double good for us,” Kotek said. She opted to see the glass as half full, noting that Intel has an ongoing commitment to Oregon, which is the company’s largest operating hub and the heart of the company’s research.

While she said she doesn’t know why Intel passed over Oregon for its latest expansion, Kotek – a longtime state representative who most recently served as speaker of the House – said she would pursue a personal relationship with Intel’s CEO as governor.

Johnson, a former state senator, shot back at Kotek: “I actually do know the answer to the question because I talked with Intel executives. And the answer was, Answer the damn phone.”

The state neglected its relationship with its biggest corporate employer, Johnson said, and failed to set aside “a little bit of expansion land” for the company.

“Nobody in the governor’s office saw the warning signals or reached out to Intel when the tallest tree in our Silicon Forest is on its way out the door to Ohio,” Johnson said. “There were plenty of warning signs.”

It was indeed apparent for months before Intel’s Ohio announcement that Oregon was likely to miss out on the new chip factories being built elsewhere in the country. Gov. Kate Brown’s office had identified Intel expansion as a top priority, but it isn’t clear what steps – if any – the administration took to pursue the new factories.

It might not have been easy for Oregon to land Intel’s expansion, though, regardless of how much attention the company received from state leaders.

The company secured up to 2,000 acres for its Ohio expansion and chose a site near Ohio State University for access to a top engineering school. Those are assets Oregon can’t offer.

Moreover, Ohio promised Intel more $2 billion in incentives to support the project, including a $600 million direct subsidy. Intel enjoys Oregon tax breaks worth more than $170 million a year, but matching Ohio’s incentives might have required a substantial allocation from the state’s general fund.

With thousands of experienced chip industry professionals working in the Portland area, though, and a constellation of industry suppliers already on hand, Oregon might yet be appealing to smaller manufacturers considering expansion.

Drazen, formerly the Republican leader in the state House, said Intel’s decision to expand in Ohio was shocking but shouldn’t have been surprising.

“We have one of the worst regulatory and tax environments in the nation for businesses in Oregon,” Drazen said.

Oregon’s tax climate is actually well suited to capital intensive manufacturing. The state does not have a sales tax to levy on industrial equipment and awards technology companies hundreds of millions of dollars every year in property tax breaks.

The state’s regulatory structure, though, has been a frequent source of consternation for all manner of businesses who complain that the state’s rules are confusing and cumbersome, impeding big investments. Gov. Brown is leading the task force subcommittee studying whether regulatory changes could make Oregon more appealing to chip manufacturers.

In last month’s debate, Drazan suggested Ohio’s success in attracting Intel should be a lesson to Oregon leaders on how to attend to businesses’ needs – and of the importance of prioritizing private industry.

“We need to recognize that Oregon is stronger when our business sector can in fact grow here,” Drazan said.

— Mike Rogoway | [email protected] | twitter: @rogoway |

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