Collins Aerospace to get $1.8 million from state to expand Cedar Rapids microchip production
A state board approved public funds Friday for manufacturing giant Collins Aerospace's plan to expand microchip production at its Cedar Rapids campus.
Under the incentives from the Iowa Economic Development Authority, Collins will receive $1.8 million in tax credits to renovate about 20,000 square feet of production space and buy equipment to make the chips. The board's approval came three days after the Cedar Rapids City Council approved a $1.1 million grant for the project.
A Collins spokesperson said in an email Friday that the chips are for military communications equipment. The company will remodel part of its building from April through January, then install the new equipment through January 2025.
"This new facility represents the best of our community’s strong history in advancing aerospace technology and further reinforces Cedar Rapids’ reputation as a hub for cutting-edge manufacturing," City Manager Jeff Pomeranz said in a statement Friday.
As part of the agreement with the state, Collins will retain 25 employees and add 16 more. The company employed 7,800 workers in Iowa as of February, according to the IEDA.
Cedar Rapids' biggest employer, Collins has gone through several corporate changes in recent years. United Technologies Corp. bought Collins in 2018. It and Raytheon merged a year later. Under anti-trust scrutiny, Collins agreed to sell its GPS manufacturing business to United Kingdom-based BAE Systems in 2020.
"There's just been a lot of unknowns and uncertainties during these transitions and everything," Cedar Rapids Metro Economic Alliance Vice President Ron Corbett said Friday. "But now it seems like we’re through all that. The investments are taking place."
Companies struggled to get microchips after the start of the COVID-19 pandemic amid strict government-ordered lockdowns in southeast Asian countries where manufacturers make much of the world's supply. In response, Congress passed a bill in August that allocated $39 billion to companies to make chips in the United States.
The Collins spokesperson said Friday, however, that the company does not plan to apply for the federal funding for the Cedar Rapids project. According to the IEDA, the renovation will cost $22 million ― $12.5 million for the equipment and $9.5 million for the construction.
The company will fund about $21 million of the project on its own, according to the IEDA, with the city kicking in the rest of the money. The city funds will come from an existing tax increment financing district, according to the Cedar Rapids Gazette. Governments devote property tax revenues generated in TIF districts to improvements within their boundaries ― in this case, Collins' property tax payments will go to Collins' renovation.
In July, Raytheon CEO Greg Hayes told analysts the company was operating "hand-to-mouth" in its search for chips, then in October said the company's distributors and manufacturers were increasing their chip-making capacity. In February, he said the company's agreements with suppliers had helped it secure the products it needed.
"Chips, for the most part, are no longer an issue," Hayes said at the Barclays Industrial Select Conference.
Collins reported a $2.34 billion operating profit in 2022, up 3% from the year before.
Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.
This article originally appeared on Des Moines Register: State gives Collins Aerospace $1.8 million for Iowa microchip production
