Apple to build new Austin hub, expand in other tech hotbeds

By Associated Press 13 December 2018, 12:00AM

AUSTIN, Texas (AP) — Apple plans to build a $1 billion campus in Austin, Texas, that will create at least 5,000 jobs ranging from engineers to call-center agents while adding more luster to a Southwestern city that has already become a bustling tech hub.

The decision, announced Thursday, comes 11 months after Apple CEO Tim Cook disclosed plans to open a major office outside California on the heels of a massive tax break passed by Congress last year. The tax cut on overseas profits prompted the company to bring about $250 billion back to the U.S., freeing up money for more investments and higher dividends for Apple shareholders.

The company said it will also hire thousands more engineers in several other emerging high-tech hotbeds. Apple plans to open three new offices that will each employ at least 1,000 workers in Seattle, San Diego and Culver City, California. Apple also pledged to add hundreds of new jobs each in New York, Pittsburgh, Boston, Boulder, Colorado, and Portland, Oregon.

"They are just picking America's most established superstar cities and tech hubs," said Richard Florida, an urban development expert at the University of Toronto.

Apple's scattershot expansion reflects the increasing competition for engineers in Silicon Valley, which has long been the high-tech capital in U.S.

The bidding for programmers is driving salaries ever higher, which in turn is catapulting the average prices of homes in many part of the San Francisco Bay Area above $1 million, causing many workers with computer coding skills to live in less expensive places with less traffic congestion.

That, in turn, is causing more tech companies like Apple, Amazon and Google to set up shop outside Silicon Valley to hire the talent to pursue their ambitions to expand into new products and fields of opportunity.

"Almost every place else in the U.S. is cheaper than Silicon Valley," said Jeb Kolko, chief economist for employment website "Companies that can find the workers they need elsewhere often do."

Cities around the country offered financial incentives in an attempt to land Apple's new campus, but Cook avoided a high-profile competition that pitted them against one another, as Amazon had before deciding to build huge new offices in New York and Virginia.

Amazon could receive up to $2.8 billion in incentives in New York, depending on how many it ultimately hires there, and up to $750 million in Virginia. Apple will receive up to $25 million from a jobs creation fund in Texas in addition to property tax rebates that still need approval. The figure is expected to be a fraction of what Amazon received in New York and Virginia.

The spots where Amazon and Apple decided to expand were obvious choices, based on an analysis released earlier this year by CBRE Research. Washington, D.C., ranked as the third best place in North America for tech talent, behind Silicon Valley and Seattle. New York ranked fifth and Austin came in sixth. (Toronto was fourth.)

The new Austin campus, with about 3 million square feet (nearly 280,000 square meters) of office space, will be about a mile from another large office that Apple opened five years ago. Apple currently employs about 6,200 workers in Austin, making it the company's largest hub outside Silicon Valley even before the expansion. Apple recently completed an even larger complex that serves as its new headquarters in Cupertino, California, where it still maintains its old campus.

The new Austin jobs are expected to mirror the same mix Apple already has at its existing campus, ranging from jobs in technology and research that pay well over $100,000 to lower-paying positions in customer call centers. Austin Chamber of Commerce Board Chairman Phil Wilson described jobs that Apple will be adding as "mid-skill" and "good-paying."

Austin's tech industries accounted for nearly 140,000 local jobs, or 14 percent of Austin's total employment, about twice the national average, according to the city's chamber of commerce.

Virtually all of the jobs in Seattle and San Diego will be in technology — a field where six-figure paychecks plus stock options are standard compensations. The jobs in Culver City, about eight miles from Hollywood, will be a mix of technology and digital music and video programming, two areas where Apple is rapidly expanding to compete with the likes of Spotify and Netflix so it can sell its own subscription entertainment services to its legion of iPhone, iPad and Mac computer customers.

Back in January, Apple pledged to use part of its windfall from its tax breaks to finance more than $30 billion in capital expenditures in the U.S. over the next five years. It also committed to creating more than 20,000 more U.S. jobs during that same time frame. After adding 6,000 jobs, Apple said it now has 90,000 U.S. workers and is on track to fulfill its expansion pledge on schedule.

Where U.S. companies open new facilities or plants has always had the potential for public and political backlash.

That potential has intensified under the Trump administration, which has pushed companies to keep more of their operations inside the country's borders.

While Cook has steered mostly clear of President Donald Trump's ire, Apple did receive some pushback three months ago from the White House. Apple sent a letter to the U.S. trade representative warning that the burgeoning trade war with China and rising tariffs could force higher prices for U.S. consumers. Trump in a tweet told Apple to start making its products in the U.S., and not China. Apple uses a lot of overseas facilities in China and elsewhere to produce components and its products.

Cities are eager to bring in more tech employers because companies like Apple and Amazon ladle out six-figure salaries to engineers and other skilled workers.

The infusion of thousands of new and highly paid residents can ripple through the economy of a city and the surrounding region, with those employees filling restaurants, theaters, buying property and paying taxes.

But an influx of affluent tech workers can also cause a backlash among other people living in and near the cities where their offices are because their wealth typically drives up rents as well as home prices, making it more difficult for those in lower-paying jobs to make ends meet.

"When tech companies invest in a place and try to hire thousands of workers, it is of course good news for tech workers who are already there and want to be there," Kolko said. "But it can put a strain on the housing market and transportation."

Austin might not feel the stress as much as some other places, Kolko said, because it already has been building more housing so it might be better able to meet the forthcoming demand from Apple's expansion.

Apple opened its first office in Austin a quarter century ago, and Dell's headquarters are in nearby Round Rock. Google, Facebook and IBM are among the other notable tech companies with satellite offices in Austin.

Austin landed another coup in July when the U.S. Army announced plans for a "Futures Command" center to train soldiers and develop technology to combat threats from places like China and Russia.

Texas Gov. Greg Abbott hailed Apple's new campus as a milestone development that "truly elevates Austin as one of the primer technology hubs in the entire world."

By Associated Press 13 December 2018, 12:00AM

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