LONDON – Paul Otellini, the president and CEO of Intel Corp., has called for the U.S. government to provide tax concessions for companies that build factories in the United States, according to a Reuters report.
Otellini, speaking during a presentation at a Council on Foreign Relations event in New York on Tuesday (Oct. 5), said that the concessions, either in the form of tax credits or tax holidays would help create jobs and would make the United States competitive with other countries, the report said.
Building and operating a wafer fabrication facility for semiconductors can cost up to $1 billion more in the United States than in some other countries, with 90 percent of the difference being down to tax and incentives rather than labor cost, the report referenced Otellini as saying.
"We should offer tax credits or a five to 10 years tax holiday to companies, domestic or foreign, that want to set up factories in the U.S.," Reuters quoted Otellini as saying.
The majority of Intel's wafer fabs are in the U.S. It also has fabs in Ireland and Israel. Intel's latest wafer fab is under construction in Dalian China and government incentives were part of the reason, the report quoted Otellini as saying.
Perhaps the federal and state governments can strike a compromise here -why don't they consider a tax deferral for a few years allowing the economy to gather some steam. One would then hope that hiring and the ancillary growth in the so called ecosystem of companies like Intel would increase the tax base and the tax revenue by increased hiring. But if companies respond like they have these days (cash rich but hiring none!), then there is no cure for it.
On a longer horizon, manufacturing has to come back to the US. I hope that is what the big businesses are intending to do with the tax breaks. Otherwise, there is no merit to seeking these tax breaks!.
Dr. MP Divakar
If the U.S. gives special breaks, China and others will give bigger breaks. It becomes a race to the bottom, and who honestly believes that a race to the bottom with China is going to solve any long-term economic issues?
Taxes are only one factor influencing the location of a new fab, or design center, or plant. Labor cost and availability, infrastructure, geographic demand distribution, and transportation costs generally are much larger factors than taxation.
The key is not to match the tax rates of developing and third-world nations. The key is to make sure our own taxes do not favor offshoring and importing over domestic production and exporting. Let's address those tax imbalances first, before deciding that the only thing we can do is to engage in a race to the bottom.
It's all about Supply and Demand. You can try to turn this into class warfare to only end up hurting yourself and the country.
The Demand side is simple to understand: Intel and other high tech manufacturers have to keep investing in cutting edge manufacturing capacity.
The Supply side is simple too if you can take your head out of the ideological clouds. Supply is in the form of cheap labor and locale specific incentives. Intel is not a charity or a not-for-profit company. All decisions are made based on strategic business direction followed by a choice of what gives the best return on their investment. $1B cost savings on the life of a wafer fab is REAL money.
The question you fail to ask but is the most relevant is given China's large wage rate advantage why does China offer tax incentives at all? Simple answer once again: it's about the JOBS! Guess what the taxable income from jobs is to the US of a factory in China is? ZERO! Three laws of real estate and business: LOCATION, LOCATION, LOCATION! Isn't any amount of tax income better than NO tax income to the US with a factory located in the USA?
America has got to take the class warfare out of this discussion because it is killing America's economic engine.
Other countries are giving tax breaks to employers who locate manufacturing facilities in their countries. Even to the point of reimbursing them for certain labor content of the product. They get away with it, so to be competitive we (the USA) should also. If done properly this is not anticompetitive / antitrust.
Everyone acts like we are rich or something. I personally have no problem with tax breaks for companies that create jobs in the US, but the other side of the coin must also be addressed: Tax penalties for every job shipped overseas. This would be a revenue neutral approach that could be wrapped in a Patriotic bow.
We must balance the budget. For every dollar of incentive given there must be a counterbalance revenue increase or budget cut. The US is broke. We should start acting like we are trying to fix it or there isnít going to be a US in the future.
Here is an interesting read: http://www.electroiq.com/index/display/semiconductors-article-display/6866366914/articles/solid-state-technology/semiconductors/industry-news/business-news/2010/october/intel-gets_israeli.html
"The Ministers of Finance and of Industry, Trade, and Labor reportedly have approved an eight-year, up to 678M shekel ($187M) grant to help upgrade Intel's Fab 28, which opened in the southern city of Kiryat Gat two years ago, from 45nm to 22nm process technologies (plus another 63M shekels/$17M for R&D expansion or local research). The deal also stipulates that Intel must increase its Kiryat Gat workforce by about 22% (570 workers) to 3100 total, and add another 50 workers to its development center in Jerusalem."
It's something less of a step, though, than Intel had wanted -- the company originally lobbied for a $400M grant to bolster its planned $2.7B upgrade of Kiryat Gat, with 400 new hires. (Note the Ministry's Investment Center has a 500M shekel/$151M annual budget.) Nevertheless, Intel reportedly has pledged to "make every effort to see that Intel's next investment in upgrading technology will be implemented in Israel."
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