Case Study: The Building Central Florida’s Semiconductor Cluster for Broad-Based Prosperity -   Two Years After the Building Back Better Regional Challenge Winner Award

In September of 2022, the Economic Development Administration (EDA) awarded under the Build Back Better Regional Challenge (BBBRC) a total of roughly $1 billion to 21 regional coalitions across the country. Created through the American Rescue Plan Act of 2021, the BBBRC solicited proposals from communities across the country aimed at transforming local economies through collections of complementary and integrated projects. Among these 21 awardees is the Building Central Florida’s Semiconductor Cluster for Broad-Based Prosperity, which is addressing the urgent need to diversify Central Florida’s economy by targeting low-volume, highly customized semiconductor products that specifically target the nearby aerospace, defense, and medical industries.

Background

Since first opening its doors in 1971, the Walt Disney World Resort has grown to one of the most widely visited locations in the United States for both international and domestic vacationers. Located in Orlando, the county seat of Orange County, Florida, the sprawling series of theme parks, hotels, and all of the amenities associated with them contribute immensely to the economy of Florida writ large. In fiscal year 2022, Disney was responsible for generating $40.3 billion in statewide economic activity through direct and indirect channels.[1] Its state and local tax receipts that same year totaled $3.1 billion—including $1.1 billion for Orange and Osceola counties alone—while those of non-local visitors, employees, and third-party businesses totaled $3.5 billion.[2] In total, roughly 82,000 jobs across the state are directly supported by the Walt Disney Company, accounting for about one in eight of all Central Florida jobs.[3]

Yet such a high regional economic concentration in the tourism and hospitality industries inherently leads to an overreliance on them, and any significant shifts in operating models have the potential to severely disrupt economic equilibria for workers businesses alike. This stark reality was laid bare twice since the beginning of the 21st century: first during the Great Recession, and second at the onset of the COVID-19 pandemic, which led to a precipitous drop in the number of annual Disney World attendees. During the week of March 22, 2020, when the public was beginning to grasp the severity of the then-unfolding public health crisis, hotel revenue across the state of Florida declined by over $415 million compared to a year prior, while vacation rental bookings were down 78% over the same period.[4]

Workers in Florida were particularly negatively affected by the slowdown in travel and tourism. In March 2020, some 290,000 more Floridian workers had filed claims for unemployment insurance compared to March 2019, representing an increase of over 1,000%—roughly 200 percentage points higher than the overall national increase.[5] By May of 2020, Osceola County’s unemployment rate had reached 31%—the third highest of any county in the United States.[6] Disruptions of this scale harm not only those workers who are directly employed in the tourism and hospitality industries but also those whose incomes are directly affected by local spending. As was demonstrated by the economic fallout generated by the COVID-19 pandemic, such secondary effects can wreak havoc on regional economies with high industrial concentrations.

Building Central Florida’s Semiconductor Cluster for Broad-Based Prosperity

For many stakeholders across the seven-county Central Florida region it had become clear that diversifying economic activity would be critical to the region’s long-term success. This process began in the aftermath of the Great Recession, when Osceola County invested in a 500-acre technology district known as NeoCity. To build off the successes generated from this initial asset, a coalition led by the Osceola County Board of County Commissioners laid out a vision of economic recovery and revitalization that sought to leverage the nearby aerospace, defense, and medical industries as well as ensure that future global economic disruptions would have less extreme impacts on Central Florida’s businesses and workers.

These efforts culminated in the coalition’s application to the Build Back Better Regional Challenge, titled the Building Central Florida’s Semiconductor Cluster for Broad-Based Prosperity, which has received $50.8 million to significantly enhance the region’s ability to create the low-volume, highly customizable semiconductor products that are increasingly required for highly specialized aerospace and medical applications. Responding to the 2022 State of the Union Address in which President Biden emphasized the critical need to reshore semiconductor manufacturing, the coalition noted at the time of its application that no location in the United States had at that point successfully stood up facilities that were capable of such customized processes. The BBBRC investment would establish them as a clear leader in the field.

To achieve this industrial lead, the coalition is working to expand all aspects of the advanced packaging semiconductor supply chain as well as foster a greater degree of collaboration among members of the cluster that might otherwise have limited interaction. This effort begins with continuing to facilitate engagement among relevant regional entities through tailored funding guidance, strengthening ties between industry and local research institutions, and providing commercialization guidance. It further includes expanding and scaling a workforce development initiative, named UpSkill Osceola, by aligning curricula across training programs in Central Florida with the knowledge and skills most needed by regional employers. In addition to ensuring a steady supply of talent to a burgeoning semiconductor cluster, this program provides employer training and consulting in using skills-based talent strategies to expand opportunities into high-wage careers for residents without bachelor’s degrees.

Keeping pace with the technological advancements in a rapidly changing sector requires significant upfront costs in the form of new equipment and infrastructure improvements. The Central Florida Semiconductor Cluster is ensuring that regional firms at NeoCity’s Center for Neovation have access to the most up-to-date assets and tools to enable next-generation microelectronic systems manufacturing. The coalition is similarly building out cleanroom space for advanced packaging processing, increasing ultra-pure water utilities, and outfitting existing semiconductor manufacturing spaces with the backup power systems required for these high-precision processes.

Finally, the University of Central Florida Research Foundation, a coalition partner, is designing and developing a Microelectronic Digital Twin (MeDT) of the Center of Neovation to deliver a capability that increases reliability and productivity while minimizing costs and risk. By providing the opportunity to test and optimize manufacturing processes digitally rather than physically, MeDT will allow cluster partners to refine and prove their concepts before ever having to use the coalition’s equipment, thereby reducing their risk of damage, decreasing their maintenance costs, and extending their lifecycles. The digital twin will also provide greater opportunities for a larger number of firms and research partners who will no longer have to endure long wait times to access rare technology.

Year-Two Marker

Two years since the initial Build Back Better Regional Challenges winners were announced, there are strong indications that the Building Central Florida’s Semiconductor Cluster for Broad-Based Prosperity is achieving its vision of a more diversified, forward-looking regional economy.

Efforts to foster a more tightly integrated semiconductor ecosystem are proving successful, with the Orlando Economic Partnership and the Florida High Tech Corridor, two Orlando-based nonprofits, formally establishing the Cluster Management Organization (CMO). To date, the CMO has 30 members—outpacing initial projections—and is scaling up its planned activities, services, and overall workplan to support semiconductor manufacturing firms. Similarly, UpSkill Osceola has set the foundation to begin workforce trainings and is ramping up collaboration efforts among regional training partners. To date, it has started conducting skills-based hiring workshops to ensure that employers are removing barriers for workers and maximizing their ability to recruit qualified applicants; UpSkill Osceola has also completed a study to determine baseline educational metrics of the region to determine where future investments in the workforce will be most effective.

Moreover, the coalition has identified 17 advanced packaging tools that are likely to be most important in helping the regional cluster keep pace with rapidly evolving technology. Such advanced tools require experts to install and calibrate, and the coalition is actively seeking bids to ensure that equipment is ready as soon as possible. To date, one has been installed, two additional tools have been delivered, and the other thirteen are all in various stages of delivery preparation or contract negotiations. Moreover, construction on the Center for Neovation’s expansion is nearly ready to begin, with all design documents having been completed. The coalition is set to break ground in early 2025, and tenants are expected to begin utilizing the space in 2026.  

Finally, the University of Central Florida Research Foundation has made significant strides in developing the Microelectronic Digital Twin application. Coalition leadership has simultaneously been working with contractors to finalize the operating and facility agreement details to ensure a seamless transition from development to utilization. The team has also been conducting an outreach and engagement effort to increase awareness of the growing custom semiconductor manufacturing cluster. Notably, researchers have already begun issuing proposals for federal grants that specifically reference utilization of MeDT from entities such as the Army Research Institute, the Office of Naval Research, and the National Science Foundation.

The coalition’s compelling narrative and strong regional assets have caught the attention of other federal agencies aiming to bolster technological advancement. In late 2023, Osceola County was awarded a five-year contract by the Department of Defense with an initial funding allocation of $3.7 million and a spending ceiling of $120 million, which positions Osceola County at the forefront of the nation’s efforts to produce next-generation microchips for the U.S. military. The contract offers options for an additional $169 million, potentially resulting in a total award of $289 million. This contract will be administered in partnership with BRIDG, a coalition member, and SkyWater Technology, a coalition partner, whose leadership has been key to the development of NeoCity as a center attracting investment, researchers, and manufacturers from around the world. Notably, Osceola County is the only local government entity in the United States that is a prime contractor for the Department of Defense.  

Moreover, the National Science Foundation (NSF) in early 2024 awarded $15 million under its Regional Innovation Engines program to the Central Florida Semiconductor Innovation Engine to support the nation’s capability for semiconductor advanced packaging design and manufacturing. That the coalition was able to secure additional investment in its vision for regional economic revitalization is a testament to both the need for such technology as well as the coalition’s expertise in executing on achieving its development.

Conclusion

Unique to federal grant competitions at the time, the strategy employed by the Build Back Better Regional Challenge sought to empower coalitions to define what shape economic development should take for their regions, economies, and residents. The Building Central Florida’s Semiconductor Cluster for Broad-Based Prosperity is an example of what is possible when the federal government allows community leaders to define in their own terms what success looks like and how they plan to realize it. As the BBBRC reaches its two-year milestone, the semiconductor cluster in Central Florida is continuing to make impressive strides in its vision for a more equitable and forward-looking economic ecosystem, all while providing high returns on the initial federal investment.

[1] Adam Sacks, Michael Mariano, Greg Pepitone. “Disney’s Effect on Fueling Florida Economy, Jobs and Tourism.” Oxford Economics. 14 November 2023. Available at www.oxfordeconomics.com/resource/disneys-effect-on-fueling-florida-economy-jobs-and-tourism/.

[2] Ibid.

[3] Ibid.

[4] “COVID-19 FL Tourism Impacts.” Visit Florida. Updated 11 November 2021. Available at www.visitflorida.org/resources/crisis-preparation/covid-19-resources-and-information-for-businesses/covid-19-fl-tourism-impacts/.

[5] Author’s calculations of “Unemployment Insurance Weekly Claims Data.” Employment and Training Administration. Available at oui.doleta.gov/unemploy/.

[6] “Local Area Unemployment Statistics.” U.S. Bureau of Labor Statistics. Available at www.bls.gov/lau/.