States and cities looking to woo projects such as Apple’s Mesa, AZ sapphire plant would do well to use that city’s actions as a case study for attracting such projects to their area.
Arizona got snubbed by Apple Inc. in 2012 when the iPhone maker picked Texas to build a new operations hub. Scott Smith, the mayor of the Phoenix suburb of Mesa, was determined to keep history from repeating itself.
Mesa, which had been severely hurt by the 2007 housing crash, made moves to offer tax breaks, build power lines, worked to fast-track building permits, and even convinced the state of Arizona to declare a vacant 1.3 million-square-foot facility that Apple was exploring as a foreign trade zone.
Mayor Smith, who celebrated Apple’s purchase of the factory late last year by placing bowls of red and green apple’s around City Hall, said, “Any time you have a company like Apple come in and invest in your area, especially with this type of operation, it’s significant.”
Bloomberg notes that Apple’s Mesa facility is an example of the type of manufacturing where the U.S. can be competitive. “When it’s operating at full capacity, this plant is going to be producing as much as two times the current worldwide capacity,” said Eric Virey, an analyst with Yole Development. The factory will be able to make enough sapphire for 80 million to 100 million iPhones a year.
The process to make sapphire glass requires a small, but well-trained workforce, which makes Apple’s new facility different from those run by Apple partner Foxconn Technology Group, which employs thousands of workers overseas who assemble iPhones and iPads. U.S. factories make economic sense when they require skilled workers to operate complex equipment.
“Everybody wants to bring industry and growth to their region — it’s extremely competitive,” said Jim McGregor, a technology industry analyst that lives in Mesa. “We’re not talking about low-skill labor.”
Apple, in the face of continued criticism over how much work it outsources to other countries, has said it has plans to expand the company’s U.S. manufacturing capacity. Apple recently debuted the new Mac Pro computer, which is manufactured in Austin, Texas.
When Apple began looking at a vacant factory in Mesa back in September, state and local officials had no idea who they were dealing with, as the initial inquiries came from an anonymous electronics company.
The city’s engineering and public works departments were peppered with questions about the site’s power and water supply, the capacity of the local sewer system, and more. Officials typically had just a few days to respond to Apple’s questions.
One factor in Mesa’s favor, the facility had been built within the last few years, thus it could be up-and-running in a matter of months.
Power sources became a stumbling block during negotiations. Apple wanted the facility to use 100% renewable energy. The company negotiated with the local power company, The Salt River Project, to make that happen. Solar and geothermal plants are being built because of the project. Officials also agreed to build a new power substation for the plant.
While construction permits can usually take months to be issued, construction permits for the sapphire glass plant project were issued in 30 days or less, some in less than 24 hours.
Other “sweeteners” added by Arizona included a $10 million grant for building improvements and help with job recruitment, and also received a designation of the area around the factory as a foreign trade zone. (Which let Apple cut its property taxes by more than 70%.)
Sandra Watson, who runs the Arizona Commerce Authority, said the incentives are tied to Apple creating jobs. The state, while home to technology companies such as eBay and Yelp, is still digging its way out of the effect of the housing crisis had on its local unemployment rate. Arizona’s December unemployment rate was 7.6%, compared with 6.7% nationally.
The news of Apple’s sapphire plant has attracted inquiries from other companies hoping to become a neighbor of the electronic device maker in a planned technology park at the city’s outer ridge.
Mesa, Arizona’s willingness to work with Apple to speed up the process of converting a vacant plant over to the process of manufacturing sapphire glass for use in the company’s future devices, looks to be a good move on the local administration’s part. However only time will tell how many new, well paying jobs will be attracted to the area via this deal with Apple.
