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December 3, 2022

Legislation would provide financial incentives for microchip makers in Illinois

As the global microchip shortage drags on, there is a movement to lure chip manufacturers to Illinois.

The U.S. Commerce Department says a survey of semiconductor chip producers shows a shortage will persist for the foreseeable future.

Microchips are in everything from cars to microwaves. According to the Illinois Manufacturers Association, 70% of all microchips are made in Asia, which has led to global supply chain issues.

“We recently saw Intel announce a chip production plant in Ohio to the tune of $20 billion,” IMA President Mark Denzler said during a House Revenue and Finance Committee hearing Thursday. “The question is why not Illinois?”

State Rep. Mike Halpin, D-Rock Island, is pushing for passage of the Manufacturing Illinois Chips for Real Opportunity, or MICRO Act.

“I think it’s time for a change and try to bring back some of those supply lines here to the United States, so what this MICRO Act does is provide a very similar series of tax incentives that we applied to the electric vehicle industry,” Halpin said.

The proposal would provide qualifying manufacturers an enhanced version of the EDGE tax incentive over 15 years. Employers would receive a tax break on 75% of income tax withholdings attributable to new employees, which would increase to 100% if a production facility is located in an underserved area. Additional credit is available for employee training costs.

President Joe Biden has asked Congress to send bipartisan legislation to his desk that would include more than $50 billion in subsidies to chip makers. The funding includes $2 billion to incentivize production of “mature node” semiconductors used by the auto industry, in medical devices and agricultural machinery.

“The need is going to continue to increase, and so I say let’s be ready for it instead of having to react after a company knocks on our door and we are struggling to get something passed,” Denzler said.

Similar legislation has passed the Senate and a House vote is expected in early April.

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