Records: Michigan offered more than $6B in failed bid to land chip factories

• Michigan promised billions in corporate incentives to Sandisk to build a semiconductor factory complex near Flint
• Company backed out despite state offer of $6.2 billion in cash, tax breaks and other sweeteners, including a 50-year tax-free deal
• The megasite, developed using taxpayer funding, also would have been given to Sandisk for free

Michigan offered more than $6.2 billion in taxpayer money  — including almost $2 billion in cash —  to the Sandisk Corporation before the semiconductor company canceled its plan to build a 13 million square foot factory complex near Flint, according to state documents obtained by Bridge.

A letter of intent for what had been called “Project Grit” shows the state was so eager to land the deal — along with Sandisk’s promised $63 billion investment and 9,400 jobs — that it was prepared to offer special sales and use tax exemptions, create a new “fab hub” tax withholding program and turn over 1,300 acres of state-funded land to the company for free. 

In exchange, the company — which signed the letter of intent in August 2024 — was initially expected to break ground this year on the first of up to four semiconductor fabrication facilities. 

“This would be a transformational, once-in-a-century investment,” Gov. Gretchen Whitmer said in May as she expressed hopes that the state could land a major chip-making facility, known as a “fab,” by the end of her second term in 2026. 

Instead, Whitmer announced Wednesday that Sandisk had walked away from the deal in the face of “national economic turmoil,” which she and fellow Democrats blamed on President Donald Trump. 

Western Digital, Sandisk’s parent company, initiated negotiations to build a fab complex under the Biden-era Chips and Science Act, which dedicated $52 billion to increase U.S. production of the kind of advanced chips used in cars, phones, computers and other devices. 

Trump paused much of the spending earlier this year, saying it was “overly generous.” Still, House Speaker Matt Hall, R-Richland Township, said he expects the recently signed “big, beautiful bill” to eventually encourage onshoring and launch “an unprecedented age of semiconductor growth.”

The $6.2 billion corporate incentive package the Whitmer administration was prepared to give Sandisk appears to be the largest Michigan has ever offered.

The Whitmer administration in 2023 reportedly offered an Idaho-based semiconductor firm called Micron at least $2.5 billion in direct incentives, along with a 50-year property tax break valued at around $23 billion. 

The offer to Sandisk included a similar 50-year property tax break, along with  other tax breaks, but the state did not estimate its potential value.

Back in 2017, Michigan reportedly offered Amazon.com Inc. $4 billion to locate its second North American headquarters in Detroit. The company chose Virginia.

SOAR fund

The offer came as the Michigan Economic Development Corporation, under CEO Quentin Messer, made site development a priority for the state starting with the Strategic Outreach and Reserve Fund approved by a bipartisan Legislature in 2021 after Ford Motor Co. bypassed Michigan for its largest capital investment. Instead, Ford turned to Kentucky and Tennessee, in part because of available land and workforce.

With the SOAR Fund, Michigan leapt into the billion-dollar tax incentive competition, eventually making over $2 billion in offers. The incentives spurred deals, but also criticism that the state was spending too much for too little in return as hiring and delays prompted no job growth. 

A Bridge Michigan investigation in spring showed that during Whitmer’s tenure just one-fifth of promised jobs were actually created after subsidy awards. Among the slowest: The largest deals, including advanced manufacturing.

The controversy extended to the Legislature, which has not included additional SOAR funding in budget proposals for the upcoming fiscal year.

Some earlier SOAR funding was targeted toward land preparation, including the megasite in Mundy Township, just south of the Flint Bishop Airport. That property is the 1,300 acres pitched for the “fab” that has largely been purchased with taxpayer dollars — although not all of the land is under contract.

‘A huge amount of cash’

The Mundy project moved ahead on August 19, 2024, when the MEDC and Western Digital signed a letter of intent, a preliminary contract outlining a roadmap for the terms and conditions and setting deadlines for the negotiations to move forward — or end.

The letter, signed by Messer, outlined $6.2 billion in subsidies with specific pricetags the state was prepared to offer, along with tax breaks.

Specified subsidies included more than $3.7 billion from two new "fab" incentives that would have provided the company with payroll tax reimbursements and exempt construction materials from state sales and use taxes. 

Another $1.9 billion in SOAR funding, most of it in cash, was offered along with additional awards for workforce training, road improvements, land acquisition and more. 

Related:

• Michigan loses massive semiconductor plant. Whitmer blames ‘national economic turmoil’
• Whitmer’s semiconductor dreams near Flint become nightmare for neighbors
• Gretchen Whitmer’s big goal: A Michigan chip plant before she leaves office
• With Flint megasite deal, Michigan tops $1B in spending on development land

Other sweeteners offered to the chip-maker include an automatic exemption of sales and use taxes on eligible industrial personal property and a 50-year Michigan Strategic Fund Renaissance Zone, which includes an abatement on state education taxes, personal and real property taxes, and local income taxes. 

“That's a huge amount of cash for a speculative project that, apparently, the business case for it was so weak that that they didn't authorize a plant in Mundy Township or anywhere else,” said James Hohman, director of fiscal policy at the Mackinac Center for Public Policy, a free-market think tank.

Hohman noted that companies that receive incentives in Michigan “have a terrible track record at delivering their job promises.” He expressed relief that the incentive offer to Sandisk did not reach the Legislature for a vote.

“I see no reason to expect that this deal, had it even happened, would have been any different,” he said of subsidized job gains. 

Still, Michigan Democrats joined Whitmer in expressing concern over the company withdrawing its planned development, though none addressed whether additional subsidies could have passed the Republican-controlled House. 

“While this pause is a setback, it does not erase the progress we’ve made or the potential that still exists within (Mundy Township’s) Advanced Manufacturing District of Genesee County,” said state Sen. John Cherry, D-Flint. “We remain committed to attracting transformative investments.”

More sweeteners

Beyond incentives, Michigan was ready to make Sandisk additional promises, according to the letter of intent. Among them:

• All properties within the boundaries of Maple Road, Hill Road, Linden Road and Elms Road would be conveyed to the company “at no cost” even though some owners have not yet agreed to sell. 
• The state would resolve environmental conditions, wetland mitigation and other issues, including relocating a drain. 
• The state would work with Flint Bishop International Airport to revise its master plan to remove a planned third runway.
• The MEDC would set up an “executive implementation team” to guide the project through zoning and other local and state approvals.
• The state would help set up a new water district “to support reduced tap and meter fees and implementation of reduced ‘super-user’ rates.
• The state said it would consider selling bonds to cover some of the company’s infrastructure upgrades.

The company, meanwhile, was expected to spend $500 million over 50 years toward community benefits projects.

At the time of the letter, the project was expected to create 7,400 direct jobs and 2,000 related contractor jobs, along with up to 5,000 construction jobs. Pay at the Sandisk fabs was expected to start at $20.61 per hour or higher. That amount is the regional median wage. It was not stated how many jobs would pay more.

The letter “memorializes certain basic understandings … regarding the proposed development and operation of a leading-edge semiconductor manufacturing complex to produce NAND flash technology,” according to the document.

The commitment was transferred from Western Digital to its spinoff business Sandisk, which became a standalone and publicly traded company on Feb. 24. The company’s stock dipped 4% in trading on Wednesday, leaving it valued at $5.9 billion, just under the dollar value of the state’s incentive offer. 

All told, the agreement went through four extensions between last summer and June, pushing back the date for final negotiations in 60-day increments. The most recent extension reviewed by Bridge expired on June 15. 

Whitmer’s office did not reply to a Bridge question about when the state learned Sandisk was exiting the deal. 

The document shows that Michigan expected Sandisk to build the fabs through 2045, with hiring ramping up over that time. 

Groundbreaking was expected in 2025, with the first fab operational by 2029, followed by other plants in 2033, 2036 and 2039.