What Micron’s Billions Toward Semiconductors Means For Inflation, Job Opportunities, The Stock Market And More

Key takeaways

• On Tuesday, Micron Technology announced plans to invest up to $100 billion into a new “mega-fab” plant in New York
• The semiconductor manufacturer and state officials estimate the factory could bring nearly 50,000 jobs to the upstate community
• Micron Technology’s stock peaked at $54.72 Tuesday and closed up 4.3% at $53.96 in anticipation of the announcement

Micron Technology, one of the world’s largest semiconductor chip manufacturers, announced Tuesday plans to open a new “mega-fab” factory in upstate New York. The 20-year, $100 billion investment is expected to bring nearly 50,000 jobs to the state.

Micron Technology’s stock saw some mild excitement ahead of the announcement, with shares peaking at $54.72 early in the day. Shares closed out Tuesday at $53.96, representing a 4.3% daily gain.

The semiconductor’s plans to expand reach far beyond the state of New York.

As the world continues to grapple with the edges of 2021’s semiconductor shortages, these tiny computer chips remain in high demand. Though that demand may see mild near-term declines as production snags ease, long-term outlook remains quite positive – for semiconductor manufacturers, yes, but also for tech investors.

Micron Technology’s plans for upstate New York

Boise, Idaho-based Micron Technology is one of the largest chip manufacturers in the world. The company boasts multiple major manufacturing plants in Taiwan and Singapore, with additional U.S. investments planned in its hometown.

Micron’s primary product is a semiconductor product called DRAM (dynamic random access memory) chips, which power all modern computers and represent some 70% of the company’s sales. These components are made in specialized factories – complete with massive clean rooms – called fabrication plants, or fabs.

To help the company ramp up production, it negotiated with New York state officials to acquire 1,300 acres just outside of Syracuse. Micron plans to invest $100 billion over the next 20-plus years to construct its mega-fab, with the first $20 billion expected to flow into the community by the end of the decade.

All told, the company plans to construct a 7.2-million-square-foot complex comprising four separate semiconductor fabrication facilities. Micron expects to hire a total of 9,000 employees, with state officials predicting another 40,000 contractor, supplier and other jobs will flood the region to build and supply the plant.

Construction is anticipated to begin in 2024.

These chips (and jobs) are brought to you by…

Post-pandemic, the United States was one of dozens of countries that suffered a dearth of semiconductor chips. These chips are required to power everything from cars and planes to refrigerators and computers.

The shortage brought to light severe supply chain concerns, as the U.S. only accounts for some 12% of global chip production. Several lawmakers warned that the nation has grown too reliant on countries like China and Taiwan for semiconductor production.

Senate Majority Leader Charles Schumer (D-NY), who championed bringing the Micron plant to New York, noted in an Associated Press interview that, “Chips are essential to our economy, and if we were to lose the ability to manufacture chips here in the United States, it would be a severe…national security risk.”

Micron Technology was one of multiple companies to publicly acknowledge a desire to invest more in U.S.-based manufacturing plants. It expects to invest $40 billion in U.S. manufacturing and R&D in the coming decade and over $150 billion globally.

The CHIPS Act

These plans were accelerated by the summer passage of the federal CHIPS and Science Act, which earmarked $52 billion in subsidies and support for chipmakers. Shortly thereafter, Micron announced that it would invest $15 billion in a new fab plant in its hometown of Boise, Idaho.

Both Schumer and Micron Technology CEO Sanhay Mehrotra hailed the CHIPS Act as key to securing the New York factory. Said Mehrotra at the announcement, “An investment of this scale in the U.S. is simply not possible without significant government and community support…. There is no doubt that without the CHIPS Act, we would not be here today.”

President Joe Biden also touted the New York investment as proof that the CHIPS Act was beginning to turn results. Said Biden, “Today is another win for America, and another massive new investment in America spurred by [the CHIPS Act]…. Together, we are building an economy from the bottom up and the middle out, where we lower costs for our families and make it right here in America.”

Local incentives sweetened the pot

Federal support isn’t all the New York promised Micron Technology. The company was lured to the Syracuse area thanks to a multitude of lucrative incentives, including $5.5 billion in state tax credits over 20 years. New York also pledged $200 million to build out the area’s infrastructure to improve road, water and power access.

New York and Micron also jointly pledged to funnel $400 million ($100 million from the state and $250 million from Micron) into a “community development fund.” The fund will be used to encourage local labor development that will provide the fab with the skilled workers it needs in the future.

All told, Micron Technology could receive over $6 billion in federal, state and community incentives over two decades.

To remain eligible for these incentives, Micron will have to build “green” plants that limit greenhouse gas emissions and expand employment opportunities. New York governor Kathy Hochul predicts that the fab will produce nearly $600 million annually in tax revenue, or about $17 billion over 30 years.

Semiconductor expansion beyond Micron Technology

Micron is just one major chip maker with plans to expand operations in the United States.

In 2020, Taiwan Semiconductor Manufacturing Company (TSMC) announced that it was preparing to break ground on a $12 billion factory in Arizona.

In late 2021, Samsung announced plans to construct a $17 billion plant in Texas, with several more potentially in the pipeline.

Intel also plans to invest up to $100 billion into eight chip fabs outside Columbus, Ohio. The company’s initial $20 billion investment is predicted to create 7,000 construction jobs and 3,000 full-time skilled labor jobs.

Micron’s financials

In the company’s most recent annual fiscal report, released on 1 September, Micron Technology reported a profit of $8.7 billion, up 48% from its previous year. However, the company’s stock remains down some 43.6% year-to-date as the broader tech industry struggles to maintain valuations.

And in a recent earnings call with analysts, Micron noted that it plans to reduce capital expenditures by 30% due to short-term weakening demand. However, the company foresees long-term growth – with memory chip demand doubling by the end of the decade – which proves the basis for its decision to move ahead with its new manufacturing plants.

What does the Micron Technology factory mean for you?

As Senate Majority Leader Schumer notes: “[Micron Technology’s] mega-fab in Central New York will deliver benefits beyond the semiconductor industry by strengthening U.S. technology leadership as well as economic and national security, driving American innovation and competitiveness for decades to come.”

But national security aside, the company’s investment – alongside those made by industry peers – has massive implications for the tech sector at large.

More chip manufacturing and research means that tech companies will have the tools they need to innovate and grow. And though manufacturing won’t start anytime soon, as the pandemic shows, the ability to produce locally could have major implications on future supply chain-related inflation and recession prospects.

Not to mention, pumping billions into construction could spell good news for construction– and infrastructure-related stocks.

So, what’s that mean for you?

For now, probably nothing beyond a short-term blip on the stock chart.

But we here at Q.ai aren’t short-term thinkers – and we don’t think investors should be, either. Successfully investing in your future is a long-term game.

So, while Micron Technology’s new plant may not be up and running for years to come, that doesn’t mean your portfolio shouldn’t be working for you now. Watching the horizon for signs of long-term industry growth and profit potential is what separates a moderately successful portfolio from a really successful portfolio.

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For investors playing the long-term game, betting on companies or industries with plans to expand can prove quite profitable – if you make the right call.

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