City Considers Partnership With Chip Manufacturing Giant

The 2020 microchip shortage – still ongoing – was caused by a disrupted supply chain, as the world realized that the chips needed for just about everything from cars to computers to household appliances, were coming primarily from South Korea and Taiwan.

In response, the Biden administration passed the CHIPS act last summer, meant to incentivize semiconductor manufacturing on U.S. soil. Crucially, that funding is tied to matching on the local level.

Thursday, City Council will vote on whether or not to give NXP Semiconductors a $1 million tax incentive deal, which would return an estimated $1.5 million in economic benefit to Austin over the next five years. This Chapter 380 incentive agreement will help the chip-manufacturing giant with its $290.8 million project Live Oak, which seeks to modernize its two existing manufacturing facilities – one in Oak Hill and one in East Austin – and add 53 new jobs.

Last week, Council heard many NXP employees testify in favor of the deal, which will also allow NXP to receive federal CHIP Act dollars to the tune of $45 million – those funds can only be accessed if there is a corresponding local deal. The city's part of that deal would reimburse NXP for 35% of its property taxes over five years. However, about a third of that reimbursement depends on NXP offering child care assistance for its employees after Council Member Vanessa Fuentes pushed for more commitment to that. NXP can become eligible for another 5% reimbursement (for a total of 40% reimbursement) if they go beyond the deal to provide more child care.

Last year, AISD rejected a Chapter 313 tax incentive deal with NXP that would have given the district $63.5 million not subject to recapture, over concerns that it would not create enough jobs. That proposed project was much larger and would have added a new plant. Nonprofit Central Texas Interfaith testified against the deal with AISD, but spoke more favorably of this deal before Council last week: CTI’s Fannie Akingbalam said, “We oppose all school district-based tax incentives, but we have not opposed city and county tax abatements if they have lived up to high community standards.” CTI sent a letter Tuesday to Council asking if NXP meets those standards, which include commitment to a living wage, local hiring, health benefits, a career ladder, and more. CTI is asking for a postponement of the vote until those questions are answered.

Opportunity Austin, the Austin Chamber of Commerce, and the Diversity Ethnic Chamber Alliance – a coalition of the Black, Asian, Hispanic and LGBT Chambers of Commerce – have all expressed their support for the deal. In a release last week, DECA wrote: “We believe this investment is not only financially sound but also aligns with our values of promoting economic growth, job creation, and a vibrant business community in Austin.”