There are around 9,000 political lobbyists in Sacramento, the capital of the fourth-largest economy in the world – but look beyond the backroom deal-making of California’s Capitol building and you’ll find a city in pursuit of reinvention.
Sacramento is ready to shed its reputation as a “government town,” as Barry Broome, CEO of the Greater Sacramento Economic Council (GSEC), refers to it, and become a central part of the US’ semiconductor industry.
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Ten years ago, when Broome moved to Sacramento, it was a very different place. The city was recovering from the Great Recession. It had a population of less than half a million people, and had been experiencing a high rate of disconnected youth. Ten years later, the population has grown by over 10%, partly fuelled by priced-out San Francisco tech workers looking for a more family friendly environment. Downtown Sacramento is only a 90-minute drive from the Bay Area.
Now, GSEC says the greater Sacramento region is the fastest-growing semiconductor market in the state. According to Newmark and Brookings, Sacramento has 26-times more concentrated semiconductor growth capital than the US average. There are both domestic and international players such as Solidigm, Intel, Samsung, Kioxia and others to thank for this, as well as efforts from local leaders to foster a business environment with clear goals. The council highlights that nine of the world’s largest semiconductor firms have a presence in the region.
The biggest foreign investment in Greater Sacramento is Bosch’s. In 2023, the German multinational purchased a $1.5bn (€1.3bn) fabrication facility, or ‘fab’, in Roseville from TSI Semiconductors, representing the biggest semiconductor investment in California in three decades. The investment was supported by $575m in CHIPS Act funding (a mix between direct funding and loans), which officials assured has not been affected by uncertainty surrounding the policy. Once the plant is up and running, it is set to permanently employ 700 workers and is projected to make up 40% of domestic silicon carbon chip production capacity.
Intel as a tech industry anchor
In the late 1990s, Broome says the city began to decline following the Base Realignment and Closure process, a government effort to close military installations following the end of the Cold War. In Sacramento, the closure of two major Air Force bases, McClellan and Mather, led to major job losses. The McClellan facility, for one, employed 13,500 people at one point.
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By GlobalDataWhile one of the biggest employers in the region withered away, the tech industry was just getting started. In 1984, Intel established its campus in Folsom, 23 miles from Sacramento. Over the years, the campus became an anchor for a growing tech ecosystem, at one point employing more than 5,000 people. While Intel’s recent downsizing has shrunk the campus and its workforce, the company’s talent and infrastructural legacy in the region have helped prop up different ventures.
One company that has benefitted from this Intel legacy is data storage company Solidigm. It is a subsidiary of South Korean giant SK Hynix, which acquired Intel’s SSD business in 2021. Solidigm moved its headquarters and research and development (R&D) facility to Folsom in 2022. Five of the executives on its 12-person board are Intel alumni. Also nearby is Micron’s R&D facility. It was initially a joint venture between Intel and STMicroelectronics, which then transformed into Numonyx. When Micron bought the facility in 2010, some of Intel’s talent came along with it.
A regional focus
The GSEC is made up of 50 CEOs and 22 community partners in the region. Over the past decade, the council has built relationships with different stakeholders to avoid nearby towns clashing and competing over one given project. They say this coordination has allowed the region to get behind one coordinated economic development strategy. Officials say the public-private nature of the project helps keep “each side accountable” in their priorities and goals.
Aside from the Bosch facility, the region is more focused on developing its R&D environment. Local leaders expressed frustrations regarding state-level environmental and housing legislation that make Sacramento less competitive in other sectors like manufacturing. When asked what cities they compete with for projects, Salt Lake City and Nashville came up, which are both in Republican-run states. Mark Friedman, founder and chairman of developer Fulcrum Property, told this publication that by the time his company starts construction on one apartment, they have already paid $60k in taxes and regulations.
For city officials, the biggest obstacles to growth are coming from a state level, not from the White House. Not one to mince his words, Broome said: “President Trump doesn’t like Sacramento, but Newsom doesn’t even know where we are.”
In terms of how Trump’s policy agenda has affected the region’s competitiveness, Friedman assures that, in some ways, it has made their offer more unique, particularly with European companies that are used to navigating complex regulatory environments such as that of the EU, and who still value pursuing more sustainable and green modes of operation.
Challenges: regulation, funding cuts and the AI bubble
In May, when Investment Monitor covered the SelectUSA Summit, many attendees and IPA officials said that foreign businesses were halting investment plans until there was some long-term clarity. When asked if this ‘wait-and-see’ attitude had changed since then, Broome said it hadn’t. The GSEC recently went on a mission trip to South Korea to meet with and assuage investors; they will soon be heading to Germany to do the same.
However, despite this uncertainty, the US continues to receive plenty of foreign investment as companies commit to new facilities in order to not lose market access.
The funding cuts to the National Institute of Health (NIH) and to the National Science Foundation (NSF), however, are another story. Broome says that, in terms of what could affect the region’s economic growth, it is what worries him the most. “It is an economic silent killer.” Currently, the region produces 2.14-times more applied chemistry research than the US average and 2.57-times more particle physics research than the national average. There are also nearly 711,000 higher education students within 100 miles.
According to Grant Witness, a project tracking the termination of scientific research grants under the second Trump administration, California has lost the most science research funding out of any state. It estimates a loss of $531.46m for the NIH and $197.75m for the NSF. The effects of a dampened research ecosystem will likely be felt in a few years.
As speculation of an AI bubble continues (OpenAI CEO Sam Altman says there is “for sure” a bubble), it is worth asking how an AI downturn would affect the region’s economic growth. When speaking with this publication, both Solidigm and Micron highlighted the increased demand they had faced due to the explosion of the AI industry over the past few years.
Regarding the possibility of an AI bubble bursting, Solidigm highlighted that the scope of its storage solutions was wider than a single sector.
“We know AI is the hot topic of today, but there are so many people that are doing so much more than that,” says director of leadership narrative and evangelist at Solidigm Scott Shadley. “If and when the AI bubble pops, and we start talking about some next new thing, we have still got the workloads covered that keep the engines running in all of the data centres.”
Micron said it was focusing on fulfilling customers’ orders.
“I don’t think it is possible that we can predict exactly what happens in the future,” Micron corporate vice-president and GM, embedded business unit, Kris Baxter says. “We have very strong demand that is carrying us into multiple years. We are continuing to focus on how do we support those customers that are asking for significant amount of supply.”
Roy Ingram, a professor of mechatronics at Sierra College, sees it differently. Ingram runs a programme that is laser focused on matching students with good paying jobs in the manufacturing industry, mostly as mechanics (its course URL is realskillsrealjobs.com). One of the main selling points of his programme is that it prepares students to go into an array of fields, from semiconductors to public utilities to automation.
“Having programmes that only prepare students to work in chip fabs or data centres is “too narrow minded,” Ingram thinks.
“It is focusing on the hype and following a butterfly through a field. To me, when those jobs and that demand dries up, guess what happens to those programmes [which only focus only on the AI industry]? They are not going to have students because it is so focused,” Ingram says. “The AI bubble will probably burst soon. In the US, it has about five more years before it sort of goes flatline.”
Ingram collaborates closely with domestic and international companies in order to design his curriculum around their needs. There are signs in his classroom listing all the sectors they prepare students for: defence, display technology, energy, entertainment, food and beverage manufacturing, industrial refrigeration, robotics, semiconductors and more. Most of his recent students have gone on to work in semiconductor manufacturing, he says, but there is one who fixes the machines for Cirque Du Soleil.
Conclusion
The city has savvily leveraged its potential and turned obstacles into opportunities. Its proximity to Silicon Valley (crucially for locals, without actually being Silicon Valley), established network of legacy tech companies and forward-looking educational programmes all push forward the GSEC’s goal of being an innovation hub. Working around obstacles, both old – high taxes and complex regulation – and new – irregular tariff regimes and dampened research funding – will be crucial to the fate of Sacramento’s economic development.
When this publication interviewed Broome in May regarding the difficulties linked to the current trade war, he said he “remains optimistic, because it is inherently American to be an optimist”. More recently, Broome had slightly changed his tone, saying he was a pragmatist. “Sometimes you’ve got to hit bottom before you change.”
