Business / Corporate

Apple deepens Austin ties with $1 billion campus, expands in other tech hotbeds

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 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 more money for investments in the country, in addition to 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 and Boston, as well as 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 the U.S.

The bidding for programmers is driving salaries ever higher, which in turn is catapulting the average prices of homes in many parts 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, such as Apple, Amazon and Google, to set up shop outside Silicon Valley so they can hire that talent and pursue their ambitions to expand into new products and fields of opportunity.

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 is receiving about $1.5 billion in incentives in New York 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 new Austin campus, expected to span about 5,000 square feet (465 square meters), 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.

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 compensation. The jobs in Culver City 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 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.

“Austin has long been among one of America’s top knowledge and talent clusters, so that’s not surprising,” Florida said. “And so is Boulder. The good news is places like Pittsburgh are starting to make real strides in becoming targets of these investments. But there aren’t a lot of other Pittsburghs in the heartland.”

The choices, he said, also illustrate the growing geographic inequality that “separates the thriving tech hubs from the more struggling and stagnating rest of the country.”

Annual pay will vary at the new locations, but Apple workers in Cupertino have an average annual salary of about $125,000, according to a report the company submitted to the city.

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