Intel Investment in Arizona

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This week, Intel announced it will be making a 6 to 8 billion dollar investment to expand and build the next generation of computer chip fabrication facilities in Arizona and Oregon. The plan includes upgrading two facilities the company currently operates in Chandler. Intel Government Relations Director Jason Bagley provides additional details.

Ted Simons: Intel announced earlier this week that it was adding up to 1,000 permanent jobs in the United States and up to 8,000 construction jobs as it starts its new chip manufacturing process. A number of those jobs will be here in Arizona as Intel upgrades two manufacturing plants in Chandler. Here to talk about the move is Jay Bagley, Intel's government relations director. Good to see you. Thanks for joining us.

Jay Bagley: Thank you. Happy to be here.

Ted Simons: What will these -- we talk about a revamp and upgrade, what's going on with these plants?

Jay Bagley: So Arizona, we have been very successful in positioning our site here to be got-to site for introducing new products, so up in Oregon, which is our developmental factory, we figure out the next product, we cook up the secret sauce, and we do a technology transfer to a high-volume manufacturing site, which is what we have here in Arizona. And so we have successfully positioned ourselves to be the first place, the leading spot in the company to introduce new products to the market. What this announcement means for Arizona is that for the first time we're going to convert both of our factories in Chandler to the 22 nanometer technology process, which is the next generation of technology that we'll be introducing to the market.

Ted Simons: How does that impact things like mobile devices, and P.C.s and these things?

Jay Bagley: It's going to have a tremendous impact. 22 nanometer really refers to the size of the transistor on the chip, what open and closes and serves as the gate for the information that goes through a chip. As we get smaller and smaller, we increase dramatically the capability of our processors. So we can do it at lower heat, we can conserve battery power, so it enables much more computing for much lower cost, and so it's going to have a dramatic impact on a number of new areas within the computing marketplace.

Ted Simons: Dramatic impact as well as speaking of enabling. Tax relief for manufacturers here in Arizona, talk about how that played into Intel's decision.

Jay Bagley: How companies like Intel, any other manufacturer, any business, how they're treated in terms of tax burden, and so forth, is a huge impact on decisions where Intel invests. So here in Arizona the state has done a pretty good job of creating a competitive environment for companies like Intel to invest. And the state's done that by addressing a couple of big disincentives that had been in place before. One, in the property tax arena, where here in Arizona, the state does not have a competitive business tax climate at all. When the typical business is paying double the rate of a homeowner, and it is grossly out of line with competing states and other geographies. Intel has been able to locate our factory site, which have an extraordinary amount of equipment, they're high-dollar, very capital intensive investments, in a foreign trade zone, which is a federal program that manufacturers are -- if they qualify, they're able to participate in, and level the playing field for U.S. manufacturers and foreign manufacturers. Here in Arizona, the state also provides a reduced burden, reducing the assessment ratio down to 5%. Given the fact Intel's investments are so capital intensive, so expensive, the valuation of those sites actually it works out to where we are still paying considerable amount of property tax. The other side of the equation deals with the corporate income tax rate. So Arizona's done two things that have a tremendous impact on Intel. One is a couple of years ago the legislature and the governor signed an own enhancement of the current R&D tax credit. And what that does is any company that qualifies under the federal definition of that program is eligible to receive that credit. And that encourages all kinds of investment. Intel is in the middle of a $100 million conversion of our original FAB 6 location for research and development, and it's create ball game 300 construction jobs, about another 200 Intel jobs. We're in the middle of doing that right now. And we spend about $450 million a year in Arizona. The other aspect is sales factor. The legislature in 2005 enacted the sales factor legislation, which dramatically impacted the tax burden that companies like Intel, where we have a highly paid work force, where the equipment that we locate in our facilities is extremely expensive, each one of our tools will run 20, 30, $40 million in our -- and our factories are full of them.

Ted Simons: We've got about 30 seconds left. I wanted to ask you, these incentives, we have people that appear on the program and they say it's not fair. It's simply -- it's not leveling the playing field, you guys are getting breaks that the other company, the other business doesn't get. How do you respond to that?

Jay Bagley: Intel is not like every other business. The jobs that Intel creates are not like every other job. The average total compensation for an Intel employee in Arizona is $122,000 a year. The single greatest thing that Intel can do to help provide tax revenue for the state, for the city, for the municipalities and so forth is to provide high-wage jobs. Comparing an Intel FAB with the level of investment, the equipment, the cost associated with that, it is not like an office building. And they should not be treated the same.

Ted Simons: All right. Very good. Thank you so much for joining us.

Jay Bagley: My pleasure.

Jason Bagley:Government Relations Director for Intel;

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