The nation’s supply of semiconductors is alarmingly low, and we’ve already seen the shortage bring factory floors to a grinding halt. Central Illinois manufacturers like ACC Electronix have had to cut back production as they wait on chips, while Ford idled lines at a Chicago plant because their supply of microchips needed to get vehicles off the assembly line had run out.
While supply chain disruptions caused by the pandemic are to blame for this problem, the real culprit is our increasing reliance on a handful of overseas providers. Nationally, the U.S. share of chip production has decreased from 37 percent to 12 percent since 1990, while our demand has increased by 20 percent in the last two years. Seventy percent of chips are made in Asia, a figure that increases to 90 percent for more sophisticated chips. It’s clearly time for policymakers to prioritize production here at home.
That’s why the Illinois Manufacturers’ Association has partnered with lawmakers to push legislation in Springfield that would do just that. The Manufacturing Illinois Chips for Real Opportunity (MICRO) Act would provide tax incentives to encourage manufacturers of semiconductors, microchips, and their component parts to create jobs and invest in new facilities in Illinois or convert existing facilities to produce these components in-state.
Illinois is uniquely positioned to host these facilities. Our state’s highly educated workforce, access to reliable energy and water resources, and centralized location in the heart of our country make Illinois an ideal location for the manufacturing of these specialized technological parts, which are commonplace in everything from laptops and cellphones to microwaves and hairdryers.
Structured similarly to a tax incentive package recently signed into law by Gov. JB Pritzker to grow electric vehicle production in our state, the MICRO Act creates a three-tiered system of incentives for large chip manufacturers, component manufacturers or companies that convert their facilities. The proposal, which has garnered bipartisan support, would provide qualifying manufacturers an enhanced version of the state’s existing Economic Development for a Growing Economy (EDGE) tax incentive over 15 years.
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Employers would receive a tax break on 75% of income tax withholdings attributable to new employees, which would increase to 100 percent if a production facility is located in an underserved area. Additional credit is available for employee training costs. To qualify, companies must meet diversity reporting requirements about their workforce and board of directors, outline a hiring plan and commitments to recruit and hire from underserved areas, and pay employees equal to or greater than 120% of the average wage paid to full-time employees where the project is located.
Already, Congress is working with President Biden’s administration to negotiate a bill that would provide more than $50 billion to aid American chip manufacturing – Illinois should be at the front of the line, leading the way forward.
If the pandemic has taught us anything, it’s the need for a strong American manufacturing sector built on reliable supply chains. Bypassing the MICRO Act, we can ensure Illinois continues to welcome high-tech manufacturing jobs and economic investment to our state while helping our nation overcome this supply chain crisis. Inaction simply isn’t an option.
Mark Denzler is president and chief executive officer of the Illinois Manufacturers’ Association. State Rep. Tim Butler, is the House sponsor of the MICRO Act.