Governor Brown, Mayor Reed and Santa Clara County Board of Supervisors President Shirakawa Announce Expansion of Samsung Semiconductor Inc.


8-16-2012

SAN JOSE – Governor Edmund G. Brown Jr. today joined Mayor Chuck Reed and Santa Clara County Board of Supervisors President George Shirakawa to announce plans by Samsung Semiconductor Inc. to create jobs in San Jose by expanding their Research and Development (R&D) facility.

“Samsung’s expansion in California is great news and it further strengthens the state’s role as a world leader in innovation,” said Governor Brown. “Here’s a case where government and business work together – and everyone benefits.”

“Samsung is excited about the prospect of expanding our facilities in the State of California. The signing of a Memorandum of Understanding demonstrates our growing partnership with the City of San Jose and highlights our shared vision of investing for the future of Silicon Valley,” said Mr. Jong Joong Kim, President of Device Solutions Management Office, Samsung Electronics.

Governor Brown, Mayor Reed and President Shirakawa signed a Memorandum of Understanding with Samsung that outlines the company’s plans to build a new expanded R&D facility in the City of San Jose. The expansion will stimulate the local economy by significantly increasing both the size of Samsung’s existing facility in North San Jose and the number of people employed there.

“I want to thank Samsung for its commitment to staying and growing in San Jose,” said Mayor Reed. “For more than twenty years, Samsung has been a leader in the type of innovation that is the hallmark of the capital of Silicon Valley. San Jose is committed to working at the speed of business to ensure the success of Samsung’s expansion plans.”

Over the past several months, the California Governor’s Office of Business and Economic Development (Go-Biz) team has worked directly with Samsung and partnered with the City and County officials to assist with site selection, workforce development and permitting issues.

“Santa Clara County is pleased to partner with Samsung to make the San Jose expansion possible. We look forward to working with Samsung, the State of California and the City of San Jose as this project comes to fruition,” said Santa Clara County Board of Supervisors President George Shirakawa.


A copy of the Memorandum of Understanding, signed today, is below:

Memorandum of Understanding between State of California, County of Santa Clara, & City of San Jose and Samsung Semiconductor Inc.


Samsung Semiconductor Inc., incorporated in the State of California (hereinafter referred to as “Samsung”), is currently planning to expand a research & development (R&D) facility at the company’s current location in the City of San Jose. This new facility will considerably increase the company’s current employment and significantly increase the size of the existing facility. The State of California, County of Santa Clara and City of San Jose welcome Samsung’s continued investment in the Silicon Valley and the region. Locating Samsung’s R&D facility in San Jose will stimulate the local economy through investment and add further depth to the Silicon Valley innovation ecosystem and California.

The purpose of this Memorandum of Understanding (“MOU”) is to set forth the common understandings and cooperative relationships between the parties as Samsung embarks upon an expansion plan that will boost the development of the semiconductor industry and stimulate the local economy through investment.

Article 1
Cooperation between the parties is anticipated to involve the following:

1) Samsung plans to invest in a research and development facility in San Jose, California.
Samsung plans to expand their current 300,000 square foot facility in North San Jose. The City, County, and Samsung will identify the appropriate level of investment and number of jobs as consideration for the incentives included in the final agreement.

2) The State of California and the City of San Jose offer the following incentive programs for Samsung’s investment at the aforementioned facility. Please note while none of the below incentives involve the County of Santa Clara at this time, the County will continue to cooperate with Samsung in furtherance of the goal of expanding a research & development facility in San Jose.

Employment Training Panel (State of California)
• ETP Contract will provide cash reimbursement for employee training

R&D Tax Credit (State of California)
• (Total R&D Labor, S/W Expense, Equipment Expense in the year) * 15% * Tax Rate

Economic Development Rate (PG&E)
• 12% discount rate, subject to the Public Utilities Commission approval of the Economic Development Rate program.

Traffic Impact Fee reduction (City of San Jose)
• Reduce fee from $12.75 per square foot to $5 per square foot

Construction Tax reduction (City of San Jose)
• Reduce construction taxes from 4.5% of valuation to 1% of total valuation

Utility Tax Rebate (City of San Jose)
• Rebate up to 50% of the 5% utility tax paid on an annual basis for ten years

Expedited permitting process (City of San Jose)
• 90 day site permit, 40 day building permit, and four designated inspectors to monitor the project

Enterprise Zone Benefits (City of San Jose)
• Tax credit for eligible employees hired after July 1, 2012 up to December 30, 2021. The hiring tax credit is worth about $37,440 per eligible employee over a five year time frame. Income tax credit on all computers, copiers, faxes, and R&D / manufacturing / assembly equipment equivalent to the amount of sales and use tax paid; and

One time economic development incentive (City of San Jose)
• $500,000 economic development incentive reimbursement for capital equipment acquisition

Article 2
The Capital Investment Incentive Program (CIIP) program cannot be implemented at the current Samsung site at this time due to existing fiscal constraints imposed by property tax related obligations. If the tax related obligations at the current site are fulfilled in the next 10 years, the State of California, the County of Santa Clara, and the City of San Jose agree to enter into good faith negotiations enacting and executing necessary actions and provide CIIP or other comparable benefits to Samsung.

Article 3
In order to activate these cooperation activities, all parties will negotiate and enter into definitive agreements for the investment plan in Article 1. Any such agreements shall include all of the incentive programs listed under Article 1. The exclusion or material alteration of any of the incentive programs under Article 1 will be cause for termination of this MOU.

Article 4
This Memorandum of Understanding expresses the initial intent for the framework of the mutual cooperation area for all parties, as well as initial activities to be performed to implement these cooperation efforts, and is intended to be a guide into further discussion for future cooperation. This MOU is not a contract and agreement and does not create any legally valid, enforceable or binding commitments or obligations of any kind between both parties. Notwithstanding this Article 4, the confidentiality obligations in Article 5 below shall be legally valid and enforceable upon all the parties to extent permitted by law.

Article 5
Samsung, the State of California, the City of San Jose and the County of Santa Clara agree not to (i) issue any press release, public statement, (ii) respond or comment on any inquiries except as required by law or City policy (iii) confirm or deny any questions regarding the matters contemplated by this MOU without the prior written consent of the other party, except as required by law or City policy.

Article 6
This MOU shall take effect upon signature by all parties and may be terminated at any time, by written notice to the other parties. The termination of this MOU shall not affect the validity of any cooperation activities and results that are initiated or agreed prior to the termination of this MOU.

The undersigned, duly authorized by the respective parties, have signed this MOU.

August 16, 2012


_________________________
Governor Edmund G. Brown Jr.
State of California

________________________
Mayor Chuck Reed
City of San Jose

_______________________
President George Shirakawa
County of Santa Clara

________________________
President Jong Joong Kim
Samsung Electronics Co., Ltd.

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About Samsung Electronics Co., Ltd.
Samsung Electronics Co., Ltd. is a global leader in semiconductor, telecommunication, digital media and digital convergence technologies with 2011 consolidated sales of US$143.1 billion. Employing approximately 206,000 people in 197 offices across 72 countries, the company operates two separate organizations to coordinate its nine independent business units: Digital Media & Communications, comprising Visual Display, Mobile Communications, Telecommunication Systems, Digital Appliances, IT Solutions and Digital Imaging; and Device Solutions, consisting of Memory, System LSI and LED. Recognized for its industry-leading performance across a range of economic, environmental and social criteria, Samsung Electronics was named the world’s most sustainable technology company in the 2011 Dow Jones Sustainability Index. For more information, please visit www.samsung.com or http://www.samsung.com/us/business/oem-solutions/index.html.

About Go-Biz
The Governor’s Office of Business and Economic Development (Go-Biz) serves as California’s single point of contact for economic development and job creation efforts. Go-Biz offers a range of services to business owners including: attraction, retention and expansion services, site selection, permit streamlining, clearing of regulatory hurdles, small business assistance, international trade development, assistance with state government and much more. For more information visit, www.business.ca.gov.

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