Legislation has been introduced to change the criteria Pennsylvania uses to distribute $10 million in financial incentives to semiconductor companies, which are part of a key industry sector Lehigh Valley Economic Development Corp. (LVEDC) is targeting for growth. 
The bill by Lehigh Valley Rep. Steve Samuelson (House Bill 2565) would decrease the minimum financial investment and job creation requirements needed to qualify for the tax credits.
Lawmakers authorized tax credits for semiconductor companies in 2022, to attract large semiconductor manufacturing operations to Pennsylvania. To qualify, projects must create 800 jobs or invest $200 million. The funding has not been tapped, and Samuelson said it’s time for Pennsylvania to rethink those requirements.
“Not only do these requirements leave out worthy businesses making great strides in manufacturing a key component of the electronic devices we use on a daily basis, but they also mean that the credit has gone unused for the past two years. I’m proposing changes to allow this tax credit to be more attainable so that it can be better used to spur economic development,” Samuelson said in a co-sponsorship memo.
His legislation proposes reducing the minimum investment to $20 million and the minimum job creation, or retention, to 100. Projects would qualify for tax credits at a rate of 2.5% of investment, meaning a $40 million investment would qualify for $1 million in tax credits. The bill also would set aside $2 million for early-stage businesses.
“My legislation seeks to make some necessary changes so that it can be used by semiconductor manufacturers all across Pennsylvania, and also to make sure we focus on early-stage semiconductor businesses,” Samuelson said at a House Finance Committee meeting on Sept. 18 where the bill was discussed.
Testifying at the meeting were Don Cunningham, President and CEO of Lehigh Valley Economic Development Corp., and Nathan Urban, Provost and Senior Vice President for Academic Affairs at Lehigh University.
Samuelson said he introduced the legislation based on feedback from his constituents in the Lehigh Valley, which has a rich legacy of technological innovation. The world’s first mass production of transistors, the forerunners of semiconductors, occurred in Allentown at Western Electric in 1951.
Today, the Lehigh Valley’s technology industry features about 30 companies including Intel, Broadcom, Coherent, Infinera, and iDEAL Semiconductor. Collectively, they employ about 1,500 people and produce technology relied upon by brands such as Google, Microsoft, Meta, AWS, AT&T, Verizon, Netflix, and Nokia, Cunningham said.
Last year, LVEDC led a coalition of partners to seek a federal tech hub designation. While the application was unsuccessful, the process helped foster future collaborations with tech companies, colleges, universities, community organizations, workforce development partners, and government partners to build on the Lehigh Valley’s strong heritage in communications technology, materials science, and advanced manufacturing. One of the outcomes of the collaboration was LVEDC’s 2023 Fall Signature Event, which explored the Lehigh Valley’s historic roots in the sector, the technological leaders here today, and the advancements planned for the future. The event recently won the Gold Award from the International Economic Development Council, the largest professional organization for economic developers.
Samuelson said his legislation could jumpstart ongoing efforts to create an incubator for early-stage semiconductor companies in the Lehigh Valley.
“There's an example right in the Lehigh Valley of how this tax credit could be used if we were able to set aside some for early-stage companies,” Samuelson said.
LVEDC and Lehigh University support the proposal, Cunningham and Urban said.
“Tremendous opportunity remains for growth of the semiconductor sector with smaller projects, but it's a very, very competitive market,” Cunningham said.
“About 15 states across the U.S. have put in place very aggressive tax credit incentive programs to attract semiconductor companies. One of the things we hear regularly from both large and small companies that we're working with to recruit is, ‘Tell me why we should do this in Pennsylvania as opposed to doing it in Texas, New York, Ohio, Wisconsin, or other states that have incentives.’ With some relatively small changes to the existing program, Pennsylvania will make itself competitive and grow this part of our economy,” Cunningham said.
He noted that Samuelson’s proposal does not call for additional state funding but would make it easier for companies to access what legislators already have allocated.
Urban told the House Finance Committee that targeted legislation such as Samuelson’s, and Gov. Josh Shapiro’s new strategic plan for economic development, will “accelerate the process of translating discovery to innovation to economic activity and to realize the potential economic impact of some of the best research universities in the country.”
“I believe that Pennsylvania and the Lehigh Valley are primed for growth in areas related to semiconductors and also life sciences, and that research universities like Lehigh must play a critical role if this potential is to be realized,” he said.
(Top photo of technology by iDEAL Semiconductor by Donna Fisher Photography. Bottom photo of Rep. Steve Samuelson courtesy of PA House of Representatives)