Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: Welcome. Good morning. This is the House Ways and Means Committee, and we are very

[Amy Spear (President, Vermont Chamber of Commerce)]: glad to be able

[Emilie Kornheiser (Chair)]: to spend this time with so many members of the Chamber of Commerce today in the middle of your manufacturing day. I'm Emilie Kornheiser and chair of the House Ways and Means Committee. We just last week, though it feels five years ago, were really excited to vote out our miscellaneous tax bill this year. It really looked deeply at how we can do as much as possible in our tax policy to support research and development in Vermont. And the process of that bill was really a great partnership between the Chamber of Commerce, the House Ways and Means Committee, our accounting association, and the tax department. And we're just really grateful for the partnership that allowed us to find a path forward in frankly, a very difficult financial time, both for the state and for all of you as businesses. And so glad to hear a little bit more about that today. We can do

[Janet Bombardier (CTO/COO, Chroma Technology)]: a quick round of introductions for

[Emilie Kornheiser (Chair)]: the committee, and then Amy would love for you to join us. So like I said, I'm Emilie Kornheiser. I'm the chair of the committee.

[William Canfield (Vice Chair)]: Bill Canfield from Fair Haven.

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: Mark Higley from the Orleans, Lamoille District. Cathy Waszazak, Barrie City.

[Carol Ode (Member)]: Carol Ode, Burlington. Bridget Burkhardt,

[Bridget Burkhardt (Clerk)]: I represent South Burlington, Williston.

[Carolyn Branagan (Member)]: And I'm Carolyn Branagan from Franklin County.

[James Masland (Member)]: You have the panel from Deborah, Sharon Stratford, Gulwich, and for your information also, I've been on GMEDC for a long period of time. Job.

[Rebecca Holcombe (Member)]: Sheriff District in the Upper Valley.

[Woodman Page (Member)]: Woodman Page, Newport. Charlie Kimbell representing Woodstock, Reading and Plymouth. He's also on GMEDC and Vepsy, but we won't talk about it.

[James Masland (Member)]: Oh, it's also on Vepsy. Oh, really?

[Emilie Kornheiser (Chair)]: Hey, thank you so much.

[Amy Spear (President, Vermont Chamber of Commerce)]: Thank you very much. I appreciate you coming down from your committee room. I know you have a very full schedule today with education, and time is precious. I'm very filled with a

[James Masland (Member)]: field trip. Thank you.

[Amy Spear (President, Vermont Chamber of Commerce)]: I'm glad to give you a field trip opportunity. So thank you, Chair Kornheiser. Thank you to the members of the Ways and Means Committee for your time today. For the record, my name is Amy Spear. I'm president of the Vermont Chamber of Commerce. I just want to set the stage a little bit about what is manufacturing in Vermont and what is the impact? Bring it down to some numbers since ways and means, we know you like to deal with more quantitative. So

[Nicholas Day (Engineering Manager, Chroma Technology)]: I want to talk more broadly about what manufacturing means for Vermont's economic future, but also just to really call out the work that

[Amy Spear (President, Vermont Chamber of Commerce)]: you did on ninethirty three on research and development. The data that we're going to show in a few moments is sourced by the Vermont Futures Project from a number of federal sources and others. It reflects where our economy is today, and it's signaling about our trajectory because ultimately economic outcomes as this committee knows, they really are the result of policy debates. Manufacturing is a major economic engine and brings in new money to our state. Manufacturing remains one of the largest contributors to Vermont's economy at over 3,300,000,000.0 in GDP and about 7% of our economy. But here's the key distinction. Manufacturing brings in new money into Vermont. It exports, it competes globally, and it grows the economic pie, rather than recycling dollars that are already within our system. When we look, where are we ten years in review? We are losing ground relative to other sectors in our state. Manufacturing has grown over the past decade, but not at the same case as other sectors, which means over time, it becomes a smaller share of our economy. And that matters because the sectors that scale and export are the ones that drive long term growth for our state. Looking at the jobs report, manufacturing supports 20 about 27,000 jobs in Vermont or about 8% of total employment. It's an industry present in every region of the state, incurring both rural and urban economies. I think we have manufacturers from every corner of the state here today. So again, thank you for your time and thank you to all the manufacturers that have joined us today. When we look at where is Vermont moving for manufacturing, the data becomes a little bit more urgent. Vermont manufacturing employment has declined 11.3% since 2020. We're also only a small number of states projected to continue to see a decline. I also want to point out that we've reached where we thought we would be in ten years already. So investing in things like research and development, which is primarily salaries, is really important for bolstering our manufacturing sector. So it's not just a trend, it's a signal and your policy decisions such as R and D are gonna really support this industry. Wage growth comes from scaling businesses. This slide shows something important. As firms grow, wages grow, and the industries where we're seeing the strongest wage growth are those that can scale, export and compete beyond Vermont. And manufacturing really sits at the center of that. So if we want wages to grow, we need to focus on how we scale businesses that are growing wages. I think some of you have probably seen this before during your committee deliberation. Innovation drives economic strength. And we're behind, but we're going to see gains there, I think, now. This is one of the clearest indicators of future economic growth. Across The US, about 3.4 of GDP is invested in research and development. In leaving states like Massachusetts, that number exceeds 9%. Vermont sits at 2.22%. Innovation investment strongly correlates with economic strength. So R and D is not just the metric, it's another important signal. It tells us where companies invest and where innovation happens and growth follows. The states that lead here have made intentional policy choices like the one that Vermont is making right now. Vermont has grown at a quicker rate than some of the other innovation states. So there's demand for research and development here. So I'm excited to see where we go when we're unlocking those economic tools for our manufacturers. Competitiveness matters in manufacturing. So growth doesn't happen in a vacuum. It happens within a policy environment. And right now, we're among the highest states in the country for taxes per capita. So investments in things like the R and D state tax credit to give tools to businesses to have in their tool belt or moving to immediate expensing for small businesses and staying on the amortization schedule for large businesses. Those are important tools to have when we're looking at our comprehensive environment. So I want to be very brief here, which is why I was moving quickly because today is really about the manufacturers that are in the room and hearing their story and why this is important. So I will stop there.

[James Masland (Member)]: Thank you, Amy.

[Janet Bombardier (CTO/COO, Chroma Technology)]: Thank you.

[Emilie Kornheiser (Chair)]: I think next up we have Nicholas Day from Chroma. Fantastic business down my way. Glad to have you And I don't know if either of you have testified yet in this room. Really glad to have you. There's a lot of white noise behind us. So if you project, we'll have a future time today.

[Nicholas Day (Engineering Manager, Chroma Technology)]: My name is.

[James Masland (Member)]: I'm from Coma Technology. Can you hear me alright? Okay. Maybe a little more projecting.

[Nicholas Day (Engineering Manager, Chroma Technology)]: Maybe a little more projecting. Alright. I'm an engineering manager at Coma Technology. I'm here with our chief technology officer and chief operations officer, Janet Bombardier. I originally planned to testify in support of the r and d tax credit expansion. I was very happy to learn that that was advanced on Monday. That was bill h nine three three. So now I'm here to keep it simple, and thank you for that and explain a little bit about Chroma Technology and what that r and d tax credit means for us and for our Vermont community. Who is Chroma? Chroma is a 100% employee owned advanced manufacturing company company located in one of the poorest locations in Vermont, in Bellows Falls. We're proud to offer good jobs to Vermonters to be part of the contributions that, were just described, from manufacturing in Vermont, including, I think it was 7.3% of the GDP and roughly 8% of employment. Using technologies similar to those used at global foundries, to make microchips, Chroma makes optical filters. Optical filters are, to you and I, look like colored pieces of glass. This is a a rather large one. We make a lot of very small ones. But these colored pieces of glass transmit specific colors of light and block the colors of light that you don't want for your application in microscopes or telescopes or consumer products. That allows you to see the details in the tiniest cell in a microscope or the largest galaxies through a telescope. If any of you happen to have had a PCR test during the pandemic, you almost surely benefited from a cold promo filter in the device that ran the test. We have sales offices in China, Japan, Germany, and throughout The US, but 100% of our manufacturing takes place right here in Vermont. We have 145 employees, and after a year of employment at Chroma, employees also become shareholders in the company. So we call each other employee owners. As an employee owned company, we provide ourselves with generous healthcare, retirement savings, and profit sharing. Chroma has been one of Vermont's best places to work for seven years running. A bit about r and d now at Chroma and the impact on Vermont. We started down in Brattleboro thirty five years ago, and our early success was built on the idea that computers and automation could allow more complex optical filters than was possible ever before. That's to say right from the start, Chroma's success was based on innovation that allowed us to do things other people couldn't do or do things better that they were able to do them. During the pandemic, Chroma crossed the $40,000,000 revenue mark. Our sales and our competition is global. We are, one of the next net exporters as was referred to earlier about manufacturing in Vermont. So we bring in that new money to the state. We're competing head to head not just against other American companies, but those from Asia and from Europe. Like us, those companies are adept at advanced manufacturing, but they often benefit from significant government support and from much cheaper labor markets. That's who we're competing against when we are net exporters. As you have recognized, R and D is essential to this global competition. The cost structure in Vermont does not allow companies to compete head to head on commodity products. Our labor costs and availability, energy costs, and tax structure are all significant economic factors when running a profitable, globally competitive business. Vermont companies must offer something better in order to win that business, and innovation is that differentiator. For Vermont, an investment in r and d is an investment in the future. R and d is essential for Vermont companies to remain competitive in local, national, and as I was just talking about, international markets. If you're not innovating, you are dying. For newer or smaller businesses, it can be challenging to build the habits and the processes needed for continual r and d. So these tax credits encourage companies to build the programs and the good habits that are needed for regular r and d just to be part of the ongoing business. So a great motivator, I'd say, for smaller Vermont companies. For Chroma specifically, these represent a meaningful increase in the motivation to continually invest in r and d. The proposed increases come close to supporting another full time hire for us, so that means we don't have to choose between the r and d and innovation and the employment growth that we need for the the immediate business growth. The expansion in tax credits can also tip the scales between taking on higher risk, higher reward r and d, and playing it safe and doing something simpler, lower risk, but also lower payoff. CHROMA's greatest r and d cost is labor. So r and d tax credits are putting money directly into Vermont employees' pockets but running through a company to make that company more innovative or more efficient along the way. So in that way, I see this as a win win win for the state, for its companies, and for Vermont residents. So thank you for your support in that bill, the r and d tax credit expansion, for taking the time to speak with the manufacturers today. Your support for this bill is an investment in the future. It will have tangible benefits for Vermont and for me and my fellow employee owners. I also wanna thank, Megan Sullivan, Amy Speer, Andrew Lurch, and all the rest of the team at the Chamber of Commerce for help putting this day together.

[Emilie Kornheiser (Chair)]: Any questions? Questions? Okay. Yeah, I couldn't help

[Janet Bombardier (CTO/COO, Chroma Technology)]: but notice in the next section, you talked about the challenge that some of your employees pay the payroll tax, but aren't eligible for childcare. How does that affect your recruitment, or does it?

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: Yes,

[Janet Bombardier (CTO/COO, Chroma Technology)]: sure. So yeah, we listed some challenges. We want to, again, appreciate everything you've done. I think in the previous committee hearings, the payroll tax for employee owned company, Chroma pays about $62,000 a year for that. Half of our employees are New Hampshire residents, We're on the Connecticut River and those of us that are close to the Connecticut River have a different employment profile than someone in Chittenden County. We have, because we're employee owned, all those employees are contributing to that payroll tax, but because of the ineligibility of a New Hampshire resident to get a subsidy, they're not eligible. Should that money be more equitable in ensuring childcare spaces, which we are in full support of, that would be a good thing. But we don't have good equity in childcare space development across the state of Vermont. So I think it needs it is an added expense. I'm not sure it's doing what we're all hoping it would do in in terms of creating spaces, but I do think we have to take into account that these employees, even though they're from New Hampshire, are contributing to this. And if this is to help employers, we should think about those costs in the Connecticut River and how best to allocate those dollars and certainly not increase that. Some of the other big concerns that some of the members know about energy. Very proud of our energy work. The last four years, we reduced our energy usage by 23%. As many of the manufacturers in the room, we have really large electric bills, I would imagine chromosomal small side at a half $1,000,000 a year. Just with the most recent increase we received, we now pay more per month than we've ever paid, even with that 23% reduction. And of that half million dollar bill, 77,000 of it, or think about it as a couple, two months of our bill, go to fees and taxes on that bill, not on the actual kilowatt hour charges. These are big challenges for all of us in manufacturing, but particularly us that use a lot of energy to make things. So that is definitely a huge headwind for all of us and very difficult to contain those kind of expenses when you're particularly competing globally.

[James Masland (Member)]: Thank you. Yeah, Doctor. Lamoille.

[Janet Bombardier (CTO/COO, Chroma Technology)]: Thank you. You mentioned in your document that Veggie helped you to get started, but you also asked for that program to continue. How do you see it helping you going forward?

[Nicholas Day (Engineering Manager, Chroma Technology)]: Yeah, to be clear, it wasn't at the start of Chroma, but Chroma expanded our current manufacturing facility, doubling our footprint. And I wasn't directly involved at the time, but my understanding is Veggie played an important role in that expansion and helping us with capital equipment costs as we helped grow the business filling in the manufacturing space that we had built there. Thankfully, as we expanded, we did leave enough room for continued expansion. And so continuing the veggie program can continue to support that capital equipment and therefore employment growth that goes along with that growth in business.

[Emilie Kornheiser (Chair)]: Patrick. Oops. Yeah. Absolutely.

[Woodman Page (Member)]: What keeps you in Vermont?

[Nicholas Day (Engineering Manager, Chroma Technology)]: What keeps us in Vermont? As I said, we started thirty five years ago down in Brattleboro, and the founding group has built a company that's deeply committed to the communities that the business has grown up in and that half of our employee base now has has grown up in. But to be honest, at multiple times in our history, we've had to repeatedly make the decision, do we stay? When we moved from Brattleboro up to Bellis Falls, built a new factory for ourselves, came very close to moving across the river. Had to reevaluate that again when we looked to double our factory size. And so over and over again, we've made the decision. We are deeply committed to continuing to support the communities we grow grow up in. But as a business struggling to stay alive, that does continually need to be reevaluated as we look at where can we we need to expand next.

[Woodman Page (Member)]: I could follow-up on what would make you decide to go elsewhere.

[Janet Bombardier (CTO/COO, Chroma Technology)]: I think one thing that made us look serious relocating is we did have a physical issue at the facility with some banks failing and thinking the building could fail. And as others have experienced the process of simply getting through the permitting to save your building. It ended up being a $3,000,000 project. Were fortunate to fight for a number of grants, federal and state, to have it only be a $1,500,000 project. But when you're fighting to get those funds and New Hampshire's calling, it definitely makes you rethink things. That's a material amount of money to invest. And I think one thing that keeps us here, but also it's like a strength and a huge weakness. We have some very deep technical talent. Well, those small pieces of glass might look like, We're talking a very, very technical process in a clean room with people with deep scientific and engineering expertise. And that core group of people are very committed. Vermont to New Hampshire for New Hampshire. Bringing in their replacements is really hard, right? For all the reasons we know, right? So bringing in deep technical expertise that's willing to come to Southern Vermont, that can find a place to live, that can be in an environment that's happy with the schools or whatever, those are all, again, serious headwinds. And that could be a factor for a relocation into a more, I don't know if you want to use the word, urban area, a more attractive area that people will come to and can find a home for.

[Emilie Kornheiser (Chair)]: What do your partnerships look like with Dallas Falls High School or the Tech Center down in Brattleboro? Before we started, you mentioned Kansas State.

[Nicholas Day (Engineering Manager, Chroma Technology)]: Yeah, I could start at least. We regularly have internships with the schools that you've mentioned, which have turned into some long term employment. Regularly do open houses to try to expose those students to the fact that advanced manufacturing even exists in Vermont. October is is manufacturing month. There's employee ownership month. So it's a big month for promo. There's lots of open houses, but we have them throughout the year and try to work with those schools just to help them inspire their students as well as help promote, build the employee base. I had mentioned, Keane State College because Keane State College has recognized that there is an optical industry in our corner of the states, you know, shared between the states. And, they have started a right now one year program, to prepare, students for manufacturing in the optics industry. And it's just a it's a fabulous program to help us build that industry now right down the the River Valley in our corner. So always trying to work with the local schools because, as Janet has mentioned, recruiting people with a technical background that we require is a big challenge. So we've looked to grow it ourselves.

[Janet Bombardier (CTO/COO, Chroma Technology)]: Just to add a positive spin on that, as an employee owned company, we have values and we dedicate a percentage of our profits to the area. So Chroma has long term scholarships at Belleau Falls Union High School for students to go anywhere, to go to the state colleges. Two years ago we populated the entire sixth grade with all new microscopes. So you want to keep good companies in Vermont because they want to do good things for Vermonters. So very supportive of what we can do for education that helps with science.

[Woodman Page (Member)]: Yeah. I was just wondering. A few years ago, the legislature changed how income taxes were structured, so using a single sales factor. So you'd only pay income taxes based on the sales that you had in the state. So I'm just wondering, it really advantaged manufacturers where their customers are out of state. So I was just wondering if Chroma has experienced that, if you looked at that and said, this is a positive change for manufacturing.

[Janet Bombardier (CTO/COO, Chroma Technology)]: It was. I don't have the dollars off the top of my head. But, yes, we were a big part of the chamber, supporting the chamber and others when those tax changes happened, they were definitely beneficial to Chroma, particularly because we sell very little in the state of Vermont. Although you too could order one today if you'd like.

[Woodman Page (Member)]: Thank you.

[James Masland (Member)]: Thank you for asking.

[Emilie Kornheiser (Chair)]: We

[Janet Bombardier (CTO/COO, Chroma Technology)]: just heard about a pro with taxes and another happiness with age nine thirty three. And we did hear about the fees and taxes on the energy bill and also the permit process situation. What do you think helps your employees with in terms of our tax policy in Vermont? And what are some cons? I think a couple of things are obvious, right? We're on the border, right? So property taxes are a big deal when you can go to work and live wherever you choose to live. So clearly people coming are always looking at, 'Can I find a house in as New well, that's a challenge. But is it overall more beneficial for me to live there than in Vermont? The other thing is any taxes that show up on any heating oil or any kind of fuel, right? We're best place to work. People will drive a long way to come to work at Cuomo. Yes, we have people who live in Bellows Falls, but we have people coming from Massachusetts from a couple of hours away in New Hampshire to work at Chroma because it's a great place to work. So anything that causes their expenses to rise significantly such that it makes them go look for either a job closer to home or live in a different state, taxes materially impact them, which then impact us because they're looking for like, hey, I need this kind of a raise to live. So it's a bit of a cycle. So particularly fuel and heating oil taxes impact our and property taxes, obviously, if

[James Masland (Member)]: you live in

[Janet Bombardier (CTO/COO, Chroma Technology)]: Vermont are big things for our employees.

[Emilie Kornheiser (Chair)]: Representative Musil.

[James Masland (Member)]: Yeah, thank you. I can see you there, Mark. One of the things that you said earlier had to do with permitting issues. There was a listening session in this room yesterday evening having to do with that 181 Act two fifty and whatnot, and what's consistent with last night and what you experienced is people talking past each other with regards to trying to solve the problem and if outside of this discussion, if we can be helpful on permitting issues for, and that's our job here, to try to help solve the problem. So, just talk with myself or other people here, if we can be useful in that discussion, please let

[Janet Bombardier (CTO/COO, Chroma Technology)]: us know. I'm sure, thank you, Jim. Masland, just as one example, I'm sure other people have other examples. Our challenge was, it was a ravine that was failing miserably, the way. And there were at least five agencies, federal and state that were deciding whether at the bottom of that ravine there was a stream or not. And those who didn't call it a stream, like the Corps of Engineers said, you don't need to talk to us. And even within the state, people said, it's not a stream. And then one department said, oh no, it's a stream. And now you have to do these things. And it was kind of a final hour. It added a ton of cost. And that in and of itself added stress, money, time. And it was a bit of we did it to ourselves. So we have shared our frustration and requests that some of those things not be in multiple departments, but it's things like that that are become very, very challenging in addition to just doing the right thing, right? But to get conflicting information

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: is very difficult. Thank you

[James Masland (Member)]: very much for that, exactly.

[Emilie Kornheiser (Chair)]: Coordination can make a world of difference navigating an indefinite process.

[Janet Bombardier (CTO/COO, Chroma Technology)]: Coordination and who actually is in charge of calling it a stream. Absolutely. That decision was really important in the whole thing.

[Emilie Kornheiser (Chair)]: Thank you both so much for your time today.

[Janet Bombardier (CTO/COO, Chroma Technology)]: We'll leave the filters to pass around if you're interested. Thank you.

[Emilie Kornheiser (Chair)]: Doug Merrill is up next. Can you hear me? Yeah. Thank you so much for joining us.

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: Okay, great. Well, thanks for having me. I really appreciate the opportunity to testify today. I'll introduce myself. I'm Doug Merrill. I'm currently the Regional Innovation Officer and the Director of the Vermont Galley Knight Tri Tech at the University of Vermont.

[Woodman Page (Member)]: Say that again more slowly.

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: Vermont, I talk fast, and I appreciate it. When is it so I work for the University of Vermont, and my role there is as the regional innovation officer. And I'm the director of the Vermont Gallium Nitride, which is a consortium of the University of Vermont, Global Foundries in the State of Vermont came together to form. I'll talk a little bit more about

[Emilie Kornheiser (Chair)]: Say what VGAN stands for?

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: Well, so VGAN is the Vermont Gallium Nitride Tech Hub.

[Janet Bombardier (CTO/COO, Chroma Technology)]: Gallium Nitride? Yes. Okay. And I'll get a

[Nicholas Day (Engineering Manager, Chroma Technology)]: little bit more into that.

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: My background is while I work at UVM now, I'm not an academic. I've spent over three decades in manufacturing. First with GE, I came to Vermont twenty one years ago, was the director of operations for Husky injection molding. And have since been in executive roles at DynaPower and SemiProbe and a few other firms. So manufacturing is near and dear to my heart, and it's part of the reason that UVM asked me to join them two and a half years ago when they were awarded this Tech Out designation by the Department of Commerce. I'll start off a little bit by going through the tech hub. We are one of 31 federal tech hubs across the nation, and our tech hub is focused on attracting firms that are designing devices that use gallium nitride semiconductor devices. Why do we wanna use gallium nitride? Because it conducts electricity about 10 times more efficiently than silicon, And it also turns on and off about 10 times more efficiently. So it's really important in energy applications, battery chargers, electric motors, inverters, things like that. Communications, so cell phone amplifiers, radios, and radar. And I've got two or three slides here that we used to try to secure funding from the federal government, and we submitted these in February. So these are three or four slides that give an overview of what we're doing. And our goal here is really to attract firms that are doing the design work in in this substrate. It was brought to our attention through Global Foundries, who is operating the first commercial scale gallium nitride fab in in The United States. And so they are a great partner. This is hopefully going to create business for them, going to help accelerate, the innovation on gallium nitride, but it's not exclusively, for their benefit. We're trying to create and and draw firms to Vermont in addition to global foundries.

[Emilie Kornheiser (Chair)]: I know this is nothing new with policy. What exactly is gallium nitride?

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: So gallium nitride is a semiconductor, and a semiconductor is a material that sometimes conducts like copper and sometimes insulates like rubber. And depending upon how you position it with voltage, it will do one or the other. It's they're pretty remarkable. And we use semiconductors. We call them a substrate. And if you think about a pizza, the dough is the substrate, and you lay all the ingredients on top. And with a chip, silicon for the last seventy years has been the the substrate of choice. And we understand so much about silicon, and we've done unbelievably amazing things on it to the point where we're now building circuits that are literally three and four atoms wide. Gallium nitride is newer, and we know it has superior properties for higher currents and faster frequencies, but we don't know nearly as much about it. This was a material that really came to the forefront about fifteen years ago, and there's a lot of research going on around the world to determine how best to use it. Almost all of us have a little bit of gallium nitride now because the first app well, the first application was blue LEDs. So if you have anything that multicolored LEDs, you bought for your kid's dorm room or something like that, that was the first application. The second is really in small power conversion devices. So if you bought a phone, a cell phone in the past five years, you may have noticed the little puck got smaller, and your phone charges faster. You can thank gallium nitride for that.

[Woodman Page (Member)]: Is it naturally occurring, or is this a man made substance?

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: So gallium is naturally occurring. Gallium nitride is man made. It's a compound. Our overall goal with trying to draw people to draw not people. Well, people and corporations to Vermont is to offer the tools that these companies need to develop new applications at very at at well under market rates. And there are three projects we proposed. The first is software design center. The software is extraordinarily expensive for these developers, about 3 to $400,000 per year per person. We have established relationships with three of the four national leaders in this design software to offer this software at well under market rates, like down to 10% of market rates to small companies working on gallium nitrile. University of Vermont is going to build a a computing center to host this software and provide the cybersecurity infrastructure needed for small companies to run this software. The second is a production and prototyping center. We've partnered with the Northeast Microelectronics Coalition and MIT Nano to basically offer a concierge service for developers to help them figure out how to actually build these devices. And then the final is a testing characterization we're opening in South Korea so that these entrepreneurs can then add these devices to at at very in short period of time. We've also proposed a workforce development program to make sure we have the available for companies that are taking advantage of this. Dean Heber, she's right there, she was the architect of our program for this and has done a great job. What would the impact speak? We're expecting over the next five years about 700 engineers and operators and technicians trained, certified technicians trained. We're expecting to to bring at least 14 new companies or offices of those companies to the region and build a design ecosystem that really complements Global Foundries' presence here. They're an incredibly important economic driver in our state, and we'd like to do our part to make sure that, a, they they remain that way, and, b, that sort of prosperity is shared across the state. Nationally, the reason that we're asking the federal government to invest in this is because it allows us to have control of the technology that builds the best, most effective radar systems in the world, smaller and cheaper communications devices, and more efficient power supplies for data centers, electric vehicles, and things like that. We've had some early wins and real commitment. So in the state of Vermont, the main reason I I wanna be here is to thank the state and you all for for the support you've given us so far. As some of you might know, we were not funded in 2025 when they made their first round. We received funding in the second round in January 2020 I'm sorry, 2024. 2025, we received funding, and then in May, it was rescinded by the federal government. Very disappointing. But we got a lot of very good feedback, and some of it was, we need more commitment from your local partners. And the state stepped up and provided $750,000 in funding for Vermont businesses to take the designs they develop and get them built. And $750,000 is a lot of money in the state of Vermont. In the semiconductor world, it may not seem like a lot, but it really makes a difference for these small companies. What it's done so far is it actually made a big difference for us in going to our other partners like Global Foundries and saying we need to sing it. And we were successful. We did get $750,000 from Global Foundries. We're very grateful to them. And that really got the attention of of of the economic development administration in DC. And they said this isn't just a UVM idea. This is something that their state the state and their local industrial partners really wanna have happen. The Northeast Microelectronics Coalition had also stepped up and funded our characterization lab. So we got 3 and a half million dollars from them to start building that right now. We're not waiting until we hear back from EDA. And so we've really had some great traction. And our our phase our phase two proposal went in in February for for our our our full implementation funding. We should hear back sometime in April here, so any day now. It's a $27,000,000 grant request. We're optimistic that it's gonna be looked at pretty favorably, and so we're we're really excited about it. And so I wanted to talk a little bit with that background. Any questions about the tech hub itself? Because I I spent some time talking to some of our members yesterday about, like, what what what they'd want me to convey. So where would you like to go?

[Emilie Kornheiser (Chair)]: Represent Meltzer.

[James Masland (Member)]: Convenient in your talk could you talk a little bit more about your partnership with UVM and how that works for workforce development? Sure.

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: The state $700,000 was incredibly impactful. I've talked with we have slide. I guess it got cut off. So I had a slide that listed our members that are here in Vermont, and I can probably do it from memory, and that that impacts all of this. So we've got large members like Global Fabrics, who you all know, I assume. We've got smaller members like Rugged Micropower in Burlington, Vermont. They were founded by a gentleman that came here with Benchmark Space, also in Burlington, and noticed a gap in the marketplace for electrical micro components on satellites and looked at what was happening in the industry, particularly with gamma nitride and said, there is a business here. I can create a power management device on a chip for the small sat business, so that's what he's doing. And that $50,000 to him is gonna be incredibly meaningful. We're trying to attract homes to Vermont. We realized initially that we initially, you had to be in Vermont to to get any benefit from the tech hub. We've now changed that a little bit to say that the biggest benefits happen if you're in Vermont. But if you're in New England or New York, you get some benefits. And if you're in the rest of the country, you get a little bit of it, but not much. And the the goal here is to give people around the country sort of a taste of what they could get from our resources and then realize it would be a lot cheaper if I did the design work here in Vermont. And that's what we are really lobbying for is bring your design work here. Or if you don't wanna do that, hire the design companies that are here. So we have Greenmount Semiconductors, ASIC North, Marvell. They all do semiconductor design work. And if you have a company that's not in Vermont, but you wanna take advantage of these, hire them, and and they they can take advantage and bring that cost advantage to your product. We're seeing a lot of competition. And I'm talking with Paul at Rugged Micropower. He is looking at programs available in Massachusetts. And so the Mass Tech Collaborative offers, like, up to $500,000 in grants to their companies. And if you think about the size of the state and the size of this, mean, we're offering $50,000 grants from the $750,000 you gave us. And it's it's making it sort of a difficult decision for people like that, which is good. We want it to be difficult. We have a great relationship with MasTec, and we're both looking about we're we're trying to we're trying to find ways where we can both benefit. And and so companies may have a presence in both locations and both benefit. The more we get into this, the more we realize in the semiconductor world that the dollars are so big that we really have to work with our regional partners. And so we're having great collaborations now with MIT, UMass Lowell, Dartmouth, to find out how do we not build duplicate resources, how do we support each other's entrepreneurs, and make sure they all know what's available across the region. And that is that that we're we're seeing a lot of success. It's a long road. These things don't happen quickly. And I'm almost certain now that our original version of this program will not be successful. We've kinda moved on. But I'm quite certain now that we will be successful. It's going to morph, and and we will see semiconductor development growing pretty substantially here in Vermont and New England. A couple of opportunities that were highlighted to me was we've got the APEX Accelerator Program. It's a national program, but Vermont has a great office of it. Some of the suggestions we had is to combine that with the NERDIC program, the Northeast Regional Defense Industrial Collaborative, and to make some of the tools available to small companies that they're facing now that they they they need to be CMMC compliant, is which a cybersecurity requirement to do business with defense department. And the smaller companies are finding that incredibly intimidating. And so they're they're sort of asking for some of the resources we've had traditionally to help pave the way to to get government contracts and defense contracts to begin to help them guide them through some of these new requirements at lower costs. There are consultants out there that will do this for these companies, but there are tens of thousands of billion dollars, and they just don't have the budget. They wanna put the r and d the budget into r and d. I'll address workforce. The the we we've got a the semiconductor issue is a huge challenge with workforce development. Global Foundries realizes it. It's part of the reason that five or six years ago when they purchased the plant from IBM, they came to University of Vermont and said, We love UVM students. Fun fact is there are more UVM grads employed at Global Foundries across the world than any other college that of their employees. Kinda surprised me. But they said that the grads we're getting here are really smart and they're eager, but they don't they're not valuable to us on day one. What could you do to help us make sure that your curriculum prepares them to be adding value when they get here? And through that, we've developed our semiconductor certificate program. And so for both undergrad and graduates, students in engineering and physics can can take, I think it's at least three required courses and two or three electives that make them prepared on day one to be effective. Global foundries supported that with helping us build out a cancerization lab, which is tremendous. It's it's sort of state of the art. And part of our tech hub proposal is to take that curriculum we've developed and make it available virtually so that Dartmouth and Lowell and some of the other colleges here that don't have semi curricular programs can then offer that curriculum to their students. Because the feedback we're getting from, RTX and BAE and Global Foundries is we generate about, I think, 10 to 15 of these students a year. Like, we we we need, like, five times that. And we're we're probably not gonna be able to fulfill that at UVM in the short term. So we need to share that curriculum and and conversely borrow curriculum from them for for other things. We're also working closely with Vermont State University and CCV on apprenticeships and credential programs for industrial plumbers, manufacturing technicians, industrial electricians, because all of those trades are necessary to have these companies succeed here. Very helpful. I also

[Emilie Kornheiser (Chair)]: have a non tax policy question. I was joking with the folks at Chroma that if we had had if Omega Optical had had strong noncompete clauses, Chroma would never exist. And I know you just had the commerce committees in here, but I'm curious. When you're building up sort of an industry cluster like this, and I imagine employees move from business to business and ideas move from business to business, what kind of sort of legal enabling environment makes that work or not work?

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: It's a good question. I don't know that I'm the expert on that. So far, in my experience in this in the past three years, found the industries to be fairly collaborative in New England. For example, we're building up a characterization lab here in South Burlington, and I was looking for an experienced test engineer, and we had applications from kind of across the country. A lot of them required visa sponsorship, which was gonna be a challenge, but I had a a test engineer apply from Essex Junction who had been involved in setting up their gallium nitride test, like, highly qualified kind of concern that I might burn a bridge for him and a bridge for me because they're our partner. And I had that conversation with him, and he said, you know, my manager understands this is gonna be great for my career, and it's probably gonna be good long term for global foundries to grow this collaborative. And he was I said, okay. I'll take your word for it. And he was totally right. And they they have given them to us with their blessing, and it's it's been tremendous. It was a little setback for them. They lost a valuable engineer, but they believe that this is gonna be good for the region in the long term. It'll be good for Global Foundries. I'm sure I could find examples where people weren't as generous or or or open minded, in general,

[James Masland (Member)]: I found that people here are

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: pretty willing to cooperate across New England.

[James Masland (Member)]: I really appreciate that. Thank you. Sure.

[Woodman Page (Member)]: Are you able to access in this part SBIR grants and other things from the federal government besides the one from the EDA?

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: So we pursued a number of different grants. We pursued some build to scale grants, which we weren't awarded, canceled that program. We're in the process of some I believe NSF is the funding agency. And then it's a microelectronics training workforce development node program, a national node program. So we're in the process of of applying for grants from a number of different organizations. SBIRs don't apply to the tech hub because we're not actually making a product, but our members do. So Paul Shepherd has received SBIR grants. University of Vermont supports small businesses that are pursuing SBIR grants, and that's for grants. Yep. So yes.

[James Masland (Member)]: Thank you. Sure.

[Emilie Kornheiser (Chair)]: Thank you so very much for your time today, and thank you, everyone, for hosting our committee.

[Doug Merrill (Regional Innovation Officer, UVM; Director, Vermont Gallium Nitride Tech Hub)]: I look forward to coming back in a year or two to report on the progress of the seminar for two thousand hours and give you examples of the products that they enable to sell.

[Emilie Kornheiser (Chair)]: We would love them. Thank you so much.

[Nicholas Day (Engineering Manager, Chroma Technology)]: Thank you.

[Emilie Kornheiser (Chair)]: For help. What's