- The Biden Administration has designated Wisconsin as one of 31 biohealth-focused Regional Technology Hubs authorized under the CHIPS and Science Act.
- Supporters say the effort could create 30,000 jobs and spur $9 billion in economic development over 10 years.
- Another $3.3 billion investment by Microsoft has helped raise hopes, but the state is still picking up the pieces of Foxconn's 2017 promise to hire 13,000 workers at the $10 billion facility that never materialized.
Until recently, Beloit, Wisconsin was a primarily rural town known as the first stop in Wisconsin for travelers crossing the border from Illinois. Now, it's here that cancer treatments take place.
NorthStar Medical Radioisotopes, a biotech startup building a fast-growing campus just off the interstate, is developing ways to use radioactive materials to diagnose and treat cancer. CEO Frank Scholz says it's the most exciting technology out there.
“This is a very promising emerging field that has the potential to make a real difference in the lives of patients and their families, because we are all affected by cancer,” he said.
North Star has been in the business for 20 years, with occasional setbacks: Last year, the company laid off 93 employees, more than a quarter of its workforce, at its Beloit and Madison facilities, blaming government-subsidized foreign competition. But now, Scholz believes the company is on the verge of really taking off. It's not just the company's technology that's drawing interest from around the world; it's also because Wisconsin is home to one of 31 Regional Technology Innovation Hubs (or “tech hubs,” for short) designated under the federal CHIPS and Science Act. The Wisconsin hub is focused on biohealth.
The designation allows Wisconsin to compete for up to $70 million in federal grants, and more importantly, it formalizes a coalition of companies that includes institutions like GE Healthcare Technologies and the University of Wisconsin-Madison, both of which have large presences outside Milwaukee, to support each other and smaller businesses like NorthStar.
“Our impact will be even greater as we are able to move patients faster and scale up,” Scholz said. “Scaling up means we can treat more patients sooner and faster.”
It's Not Just the CHIPS Act
While much of the attention on the CHIPS/Science Act has focused on efforts to restore U.S. semiconductor manufacturing capacity, the science component of the act is crucial, Commerce Secretary Gina Raimondo said.
“The 'and science' part of the bill – the tech hub – is to lead the way and ensure we're producing biotech, quantum, EVs, AI, all the things for the future in the United States,” she told CNBC.
Wendy Harris, a former GE Healthcare engineer who is leading the Wisconsin effort, has high hopes for the tech hub designation. High hopes, really.
“It's projected to create 30,000 jobs within 10 years and $9 billion in economic development over the next decade,” said Harris, who also serves as regional innovation director for BioForward Wisconsin, the umbrella organization for Wisconsin's tech hubs.
$3 Billion in Subsidies: Foxconn's Broken Promises
This isn't the first time an announcement from Washington has stoked dreams of turning America's dairy country into a tech mecca.
In 2017, then-President Trump and Wisconsin Governor Scott Walker announced that the Taiwanese electronics maker Foxconn had chosen Wisconsin to build a huge manufacturing and technology complex that would design and build giant video displays.
The company pledged to spend $10 billion and hire 13,000 new workers to build a new campus in Mount Pleasant, about 30 miles south of Milwaukee. At a groundbreaking ceremony the following year, Trump said the new facility would be “the eighth wonder of the world.”
Wisconsin pledged more than $3 billion in grants to state and local governments, the largest in the state's history, and Governor Walker declared that the region would henceforth be known as the “Wisconsin Valley.” But it quickly became clear that much of this was hype.
Within months, Foxconn began scaling back plans, citing labor costs. The company missed one hiring goal after another, and Walker, a Republican, lost reelection to Democrat Tony Evers in 2018. Evers' administration renegotiated Foxconn's incentive package, but not before state and local governments spent hundreds of millions of dollars on infrastructure improvements and land acquisition, displacing more than 100 homes in the process.
The company has now created just 768 jobs in Wisconsin, according to the Wisconsin Economic Development Corp. That's a far cry from the 13,000 high-paying tech jobs it promised. Instead of spending $10 billion in Wisconsin, Foxconn said it had spent about $1 billion as of early last year. The company built three buildings on the site, but they're underused. So it's renting out 44,000 square feet in one of the buildings as industrial or office space. Another building, which contains a striking glass sphere that was meant to be a data center, is being touted as event space.
“People are still really angry,” said Mount Pleasant resident Kelly Gallagher, who became a community activist when the Foxconn debacle broke and now serves as chair of the Racine County Democratic Party. “Everybody feels cheated, and it's going to be really hard to recover from that,” she said.
Microsoft brings AI to Mount Pleasant
Mount Pleasant is seeing a ray of hope. In May, Microsoft announced it would increase its investment in Mount Pleasant. The company said last year it would spend $1 billion to build a data center on land previously set aside for Foxconn. Now, the company is more than tripling its investment to $3.3 billion, and said the data center will focus on artificial intelligence and add more than 2,000 full-time jobs.
Racine County Council Chairman Tom Kramer, who took office after the Foxconn deal was signed and has dealt with many of its fallout, said the Microsoft deal proves that spending on infrastructure wasn't such a bad idea after all, even though the site was built for a giant factory and a much smaller data center will be built instead.
“It's like 'Field of Dreams' – if you build it, they will come,” he said. He said infrastructure improvements have given Racine County an advantage in winning the project. “There are 72 counties in this state. 71 of them want this in their backyards.”
The tech hub designation probably won't do Mount Pleasant much good initially, but supporters of the initiative believe it could soon have a ripple effect throughout southeastern Wisconsin, including Mount Pleasant, in the same way that tech companies and research universities fueled Silicon Valley.
“This initiative will attract talent to the industry and bring businesses to the area,” Harris said. “That's what we're aiming for.”
Gallaher resents it when people say that all's well that ends well in Mount Pleasant.
“We've seen the village sink into despair over the years,” she said, “and one of the worst things is the cynicism it has brought about among people.”
She said the irony extends to both Microsoft and the tech hub.
“I think the idea that we are entrusting our future to one company should give all communities pause and thought,” she said.
A new type of economic development
Raimondo, who served two terms as governor of Rhode Island and was a venture capitalist before becoming secretary of commerce, said the tech hub plan is very different from the Foxconn deal and represents a different approach to economic development.
“This is not about giving funding to any one company, and that's what makes the Tech Hub program very different,” she said. “We're not picking winners and losers at all. We're investing in the foundational expertise that these communities have.”
BioForward Wisconsin's Harris said that unlike Foxconn, all of the companies involved in the tech hub are already well-established in Wisconsin. In fact, many of the companies had been talking about working more closely together for years, she said, but the tech hub competition finally brought those discussions into focus.
“These are businesses that exist here and are successful and united,” she said.
Political calculations in battleground states
Because this is an election year and Wisconsin is the biggest battleground state, political questions permeate every issue of economic development.
Raimondo said politics have nothing to do with designating Wisconsin a tech hub.
“I'm not even involved in the decision-making,” she said. “We just have a committee of experts who evaluate the foundational assets of the community.”
But when it came to Microsoft, President Biden traveled to Wisconsin to celebrate the announcement, despite his administration having little involvement, mocking President Trump's groundbreaking at Foxconn six years ago.
“They dug a hole with a gold shovel,” he said, “and fell in.”
Trump did not mention Foxconn during a rally in Racine last week, but his supporters do not seem to be holding the incident against him.
“I don't think Foxconn is dead,” says Everett Jenks of Franksville, Wisconsin. “I think it's just delayed.”
Jenks blamed Governor Evers for cutting incentives in this case.
But in a 2021 statement after the renegotiations, Foxconn praised the Evers administration for giving it “flexibility to pursue business opportunities in response to changing global market conditions.”
In fact, even before the ceremony in which President Trump and Senator Walker presented the golden shovel took place in 2018, Foxconn had already scaled back the plans announced at the White House less than a year ago, and by the time Foxconn and the Evers Administration renegotiated incentives in 2021, video display manufacturing had long ago been removed from the plans.
“The original projections used during negotiations in 2017 have now been revised due to unforeseen market fluctuations,” the 2021 statement said.
Wisconsin continues to hand out generous incentives to entice the tech industry. Foxconn has already been approved for nearly $44 million in subsidies under a scaled-down incentive agreement, according to the Wisconsin Economic Development Corp. The company is eligible to increase that amount to $80 million if it hires 1,454 people by 2026.
The state has agreed to contribute up to $7.5 million in funding for the tech hub, and Microsoft will also get millions of dollars in tax breaks from a sales and use tax exemption for qualified data centers that Governor Evers signed into law last year after Microsoft's initial announcement. Microsoft is expected to be the first company to take advantage of the tax break.
The software giant will pay $50 million to acquire its site in Mount Pleasant, but according to an official fact sheet about the deal, any proceeds from the sale will go to Foxconn, not taxpayers, because the original contract gave Foxconn first right of first refusal to purchase the land.
