Austin City Council is poised to sign off on an economic development agreement with Netherlands-based semiconductor company NXP that would support a multiyear expansion at its Austin facilities.

Leading up to a final vote on the proposal, city officials said they hope the agreement can set a local standard for community benefits in similar processes—with a particular focus on child care—in addition to an estimated $1.53 million the city stands to gain through the deal.

“You’ve been a longtime player in this community, a longtime leader in this community. And that’s not lost on anybody. But as we take this first step, we also have to be thinking, ‘Who’s going to be next at that podium?’’ Mayor Kirk Watson told NXP representatives during a Sept. 12 briefing on the proposal. “We want Austin to be seen as somebody that’s willing to work with industries like yours. At the same time, we have some specific needs in Austin, and that’s what we’re attempting to address.”

The overview

NXP is planning to upgrade both of its Austin campuses, which are located off Hwy. 290 in Oak Hill to the southwest and off US 183 on the east side. The chipmaker's proposed investments would total $290.8 million and add 53 new jobs across both plants.

The additions would cement NXP's decades-long presence in Austin and its local headcount of more than 2,700 employees. According to the city, NXP's operations have an estimated annual economic impact of $560 million.

Mark Kroeker, NXP’s head of U.S. regulatory and government affairs, said he believes the project's job creation is a highlight of the proposal.

“We’ve been here for 50 years or more, and these sorts of jobs we offer ... are within the reach of all kinds of people in this community, be it somebody with a high school degree or an associate degree as well as people with more advanced education,” Kroeker told Community Impact. “For me, the key is the type of jobs and the pathway it offers to people to live and flourish in Austin.”

NXP officials said the company needs to retool its Austin campuses to maintain a local presence. Without modernization, NXP said activity at the aging facilities could eventually wind down, and the chipmaker could move operations outside the U.S. for new opportunities.

The company is looking for a local economic partner as it also seeks to draw some of the billions of dollars available through the federal CHIPS for America Act to Central Texas. NXP representatives said its position would be strengthened through the agreement with Austin and given continuing growth in the Texas semiconductor sector.

“Really, this is about meeting the CHIPS Act’s requirement for the local incentives because the federal government wants to see that the communities that you’re living in and existing in, that they have a commitment to this project and that they want it there,” Kroeker said.

The details

The upgrades proposed through NXP's Project Live Oak include:
  • $148.6 million in capital investments to retrofit the Oak Hill facility's production lines and the addition of 32 jobs at that campus
  • $142.2 million for new equipment at the East Austin facility and the addition of 21 jobs at that campus
Austin stands to gain a projected $1.53 million in total fiscal benefits through a five-year deal. That figure represents the city's overall expected benefits of $2.86 million, minus NXP's award package of $1.03 million in tax reimbursements and the nearly $300,000 cost of related city services.
Austin is projected to gain more than $1.5 million through the proposed economic incentive deal with NXP. (Courtesy city of Austin)
Austin is projected to gain more than $1.53 million through the proposed economic incentive deal with NXP. (Courtesy city of Austin)
The expansion deal also includes requirements for NXP on recruitment and professional development, employee pay and benefits, workplace practices, community involvement, and sustainability. NXP would have to meet its benchmarks from 2025 through 2029.

If the civic agreement is approved, Kroeker said NXP would next formally open its application for federal CHIPS dollars to support the expansion. After what could be several months of review, NXP would eventually kick off Project Live Oak.

The project earned an 80% mark in Austin's scoring system for economic deals. City staff found the initial draft agreement met almost all of the baseline requirements while falling short of the highest grades for certain community benefits and most “bonus qualifiers” for job creation, employee benefits, cultural support and environmental standards.

The full draft economic incentive agreement can be viewed here.

The context

The economic development deal would take place through Chapter 380 of the Texas government code allowing cities and businesses to trade off financial incentives for local community benefits such as job creation.

Austin maintains a few active Chapter 380 agreements, and it's been several years since a new proposal was up for council approval.

NXP's pursuit of a deal with the city comes after a separate tax incentive plan with Austin ISD was rejected by district officials last year.

What they're saying

Through their initial reviews of the proposal, City Council members appeared open to approving the deal with NXP as long as the chipmaker commits to its community benefits, such as child care offerings, which Watson called “an area of great concern and interest” among city officials and community members.

On Sept. 14, Watson said NXP was revising its proposal to provide more such resources. Kroeker confirmed the company plans to set aside a portion of its city incentives to use for those needs.

“The long and short of it is that there would be a portion of incentives that come in from the city that would be dedicated to child care. And that was a way of listening and hearing the concerns and finding a way to address them,” he said.

Mayor Pro Tem Paige Ellis, who represents Southwest Austin's District 8, including NXP's Oak Hill facility, said she's eager to get a deal done to support the expansion of an established community player.

“I appreciate having a local manufacturing hub here and appreciate them wanting to expand here in Austin,” Ellis said. “I don’t think I’ve ever taken up a Chapter 380 agreement in my time on the dais, and so this is also new to me. But I always support local businesses trying to expand and hire here within city limits. I’m excited that they’re trying to leverage our support with other federal support that is available to them.”

A Sept. 14 public hearing about the proposal featured mostly positive comments from community members and NXP employees who showed up to voice support for the plan given their experiences working for the company, its extensive community involvement and the need to further establish Austin as a chipmaking hub.

A few residents turned out in opposition to express concern over the extent of the proposed city tax breaks and environmental impacts related to expanding water-intensive chip plants.

Quote of note

“Companies like NXP, but also Samsung and Infineon and others, are all interested and exploring very robustly CHIPS Act applications and related expansions, so that’s a very good sign for the Austin community. ... That sort of activity creates a catalyst for more and more people to come in other industries and in related industries as well. Because when you have that kind of vibrant, creative and well-educated and agile workforce, it breeds more success, more activity, more interest,” Kroeker said.