Longmont semiconductor sector boosted by CHIPS Zone approval

LONGMONT — In what economic development leaders say is a win for Longmont’s burgeoning semiconductor industry, the city this week won designation for a CHIPS Zone, making qualifying companies in the sector eligible for special tax incentives.

The new CHIPS Zone, given the nod on Thursday by the Colorado Economic Development Commission and the Colorado Office of Economic Development and International Trade, is home to a handful of existing semiconductor operators and several properties that could be ripe for new entrants into the Longmont scene. 

Functioning similarly to Enterprise Zones, which provide tax incentives for companies operating in economically distressed areas, the concept for Colorado’s CHIPS Zones was developed on the heels the $280 billion Creating Helpful Incentives for Producing Semiconductors and Science Act, also known as the CHIPS and Science Act or simply the CHIPS Act. That bill, signed into law in 2022 by President Joe Biden, provides support for strengthening the nation’s position in semiconductor research, development and manufacturing.

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“Semiconductors are the 21st century’s Space Race we must win,” Colorado Sen. John Hickenlooper said in a prepared statement after Senate passage in 2022. “Relying on foreign-made semiconductors makes us vulnerable to higher prices and potentially being cut off. This bill will reinvigorate American manufacturing, lower costs, and create more good-paying jobs.”

Semiconductors are used in every electronic device, from cars to cell phones, military hardware to medical devices, computers to clean-tech equipment.

The Semiconductor Industry Association estimated prior to the passage of CHIPS Act that the U.S. share of global semiconductor manufacturing capacity has dropped from 37% in 1990 to 12% in 2022. Much of the capacity resides in East Asia, including China and Taiwan.

U.S. Department of Defense officials long have argued for increasing U.S. semiconductor-manufacturing capabilities for national-security reasons. Semiconductors are used in all major U.S. defense systems, and foreign production raises concerns not only about supply chains but also about potential “backdoors” that can be inserted into chips, allowing them to be reprogrammed or shut off.

Additionally, the COVID-19 pandemic and resulting supply-chain disruptions prompted government and private-sector companies to rethink the “just-in-time” global supply-chain model, whereby goods arrive from suppliers only when needed.

“The federal funding available through the CHIPS and Science Act represents a once-in-a-generation opportunity,” OEDIT executive director Eve Lieberman said in a statement last year when Gov. Jared Polis’ administration announced the establishment of Colorado’s CHIPS Refundable Tax Credits Program, paid for with federal CHIPS Act funds “As a state, we are deploying new tools to ensure we capture the growth it generates and assist Colorado companies as they unlock this federal funding for expansion or relocation in Colorado and create good-paying jobs for Coloradans.” 

The Longmont CHIPS Zone is made up of three non-contiguous areas in the western part of the city: One is just southwest of the Vance Brand Airport, north of Nelson Road and east of 75th Street. Another is northwest of Ken Pratt Boulevard and west of Hover Street; while the third is nearby on the east side of Hover Street, south of Pike Road. 

The CHIPS Zone properties are near Longmont’s existing Enterprise Zone boundaries, but not within them. “They can’t overlap because they provide similar benefits,” Longmont Economic Development Partnership executive director Erin Fosdick told BizWest.

There are a number of companies that work in the semiconductor industry or in complementary sectors already located within Longmont’s CHIPS Zone, including Seagate Technology PLC (Nasdaq: STX); Advanced Micro Devices Inc. (Nasdaq: AMD); Micron Technology Inc. (Nasdaq: MU); and Solidigm, a subsidiary of the South Korean chip-maker SK Hynix Inc.

Longmont semiconductor companies account for more than 500 jobs and nearly $200 million in annual sales, according to a presentation given by LEDP and OEDIT staff to Longmont City Council in December 2023.

Now that Longmont has a CHIPS Zone, companies within it may also have access to other federal incentive programs beyond those established by the CHIPS Act, Fosdick said. 

In addition to supporting existing Longmont semiconductor operators, the CHIPS Zone designation could serve as a tractor beam, drawing in new companies from around the nation and world. 

“One of the things that was most attractive to us” about pursuing a CHIPS Zone, Fosdick said, is the knock-on effect of making Longmont more alluring to industry executives and site selectors. 

“Some of the areas that were identified have some pretty substantial real estate opportunities” for newcomers looking to establish a semiconductor facility in the city, she said. “For companies already looking at Colorado, (the CHIPS Zone) might be just the push they need” to choose Longmont. “Information technology is one of the key industries that we target, so this is really just a piece of that puzzle, one more piece we can use to promote Longmont as a great place to do business.”

The Max Tech Center, a 25-acre business park on Clover Basin Drive that was formerly home to disk drive-manufacturer Maxtor Corp., is a good example of a CHIPS Zone site that’s ripe for new semiconductor tenants, Fosdick said. “It’s an incredible campus. Broe (Real Estate Group, which owns the park,) has done so much work there” to improve and modernize the facility for technology and advanced-manufacturing tenants. 

New semiconductor tenants at the Max Tech Center would be in good company, Fosdick said, as Micron leased 207,000 square feet of space in the campus in 2022 and has been building up its Longmont presence there over the past couple of years. 

With the establishment of the Longmont CHIPS Zone, it’s up to individual companies to apply for tax benefits.

“Part of what we want to do next is figure out how we make (the benefits available to CHIPS Zone companies) more well-known … and that the process (for obtaining incentives) is well understood,” Fosdick said. 

Fort Collins was the first Colorado city to establish a CHIPS Zone. Approved in June 2023, Fort Collins’ zone encompasses a portion of the Harmony Road corridor west of Interstate 25, an area where semiconductor giants Broadcom Inc. (Nasdaq: AVGO) and Intel Corp. (Nasdaq: INTC) operate within a stone’s throw of one another. 

Last fall, according to a report from the Coloradoan, Larimer County officials signed off in support of a proposal from Broadcom to tap into CHIPS Zone incentives. 

The letter did “not list the dollar amount of incentives requested but said the federal funding ‘will be critical for Broadcom to modernize and upgrade its facility in Fort Collins and will be essential to help them stay ahead of foreign competition’ and help retain 1,200 jobs with an average base salary of $72,820,” the Coloradoan report from September 2023 said. 

The local efforts by economic development leaders in both Longmont and Fort Collins, Fosdick said, have served the region by “positioning Northern Colorado as a semiconductor hub. …When our region wins, when our state wins, we all win.”