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The most expensive gas stations in L.A.: What’s the deal, anyway?

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Gasoline costs in Los Angeles have climbed to new heights this week, with Angelenos shelling out greater than $5.50 a gallon on common on the pump.

However for purchasers at a handful of infamous fuel stations throughout city, $5.50 can be a discount.

These stations are the mysterious outliers of the L.A. petroleum panorama, promoting $6.95, $6.99 and even $7.05 for a gallon of standard unleaded, seemingly in defiance of financial sense.

Point out their intersections, and lots of Angelenos gravely nod, their eyes rising vast: how can that place at Fairfax and San Vicente, or La Cienega and Beverly, or downtown on Alameda proper throughout from Olvera Avenue, cost such wild costs? What darkish secrets and techniques do they cover? And who’s determined sufficient to purchase fuel there?

With a brand new federal ban on Russian oil nudging pump costs nonetheless larger, The Instances got down to discover solutions at three of the priciest fuel stations on the town.

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On a sunny Tuesday afternoon, the Mobil on La Cienega, proper throughout from the Beverly Middle, had prospects regardless of its $6.95 worth ($7.55 for the numerous shopping for premium). Most had been in a rush, a bit misplaced or utilizing an organization card.

One man, Edvard Baretto, stated that he stopped by in his late-model Volvo SUV as a result of he was on the way in which to select up a good friend at LAX and didn’t need to set out with lower than a full tank.

Taylor Symone, who works as a nanny, was filling up her Mazda CX-5 earlier than driving her younger cost again house to West Hills after a close-by music lesson. “This was the primary place near me. I in all probability wouldn’t have gone right here had I identified how costly it was,” Symone stated.

Harwood and Ryan Lee stated that they had been within the neighborhood to purchase provides for the costuming enterprise that the couple run collectively — they do work for a lot of TV exhibits, together with “American Horror Story” — and had been including just a few gallons to the tank of their BMW M440i earlier than heading house to Mt. Washington.

“I like my automobile. The fuel costs are simply ridiculous,” Harwood stated, although working at house lessens the monetary pressure.

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Along with their TV and movie work, the pair make costumes and outfits for celebrities — Elon Musk has been a fancy dress consumer, they usually helped put the ending touches on the 2018 Met Gala outfit he designed for Grimes, the musician and Musk’s former associate. Harwood stated they plan to commerce the automobile in for the equal all-electric BMW when it turns into obtainable within the U.S.

Mike, who declined to offer his final title, pulled in to refill the tank of a model new V-12 Bentley Continental GT Velocity. The full topped $128. The one motive he was utilizing this fuel station was as a result of he wasn’t paying for it.

“As a result of I’m on the clock and utilizing an organization card and I’m delivering to a consumer, I’m simply utilizing no matter’s closest,” he stated, “but when I used to be utilizing my very own private card, Costco’s the one technique to go.”

Philip Daus, an vitality market skilled and managing associate on the pricing consultancy Simon-Kucher, stated that he had not heard of an area market having greater than a $1 differential in costs inside lower than a mile. “That’s definitely uncommon,” he stated.

Worth-conscious commuters and youthful drivers who use apps to check costs make up just one section of the driving public, Daus stated. Folks touring to unfamiliar elements of city, driving sporadically or getting their bills paid by their employers behave in a different way.

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His analysis has additionally proven that American fuel shoppers are a lot much less delicate to cost variations between fuel stations than these in his native Germany, and excessive site visitors congestion can drive anybody to decide on the closest possibility somewhat than journey off into the unknown.

Pressed to hypothesize, Daus guessed {that a} mixture of L.A. site visitors, high-value areas, low-information drivers and wealthier shoppers mixed to create a chance for some stations to shoot for the moon on worth. Nonetheless, talking from his Houston workplace, he discovered the phenomenon puzzling. “My very own mother and father would drive 10 kilometers in the event that they discovered a few fuel station that was charging 2 cents much less per liter,” Daus stated.

Excessive costs, low margins

On the Beverly Middle station, within the span of an hour, a lot of folks drove in simply to take a photograph of the fuel station’s signal displaying the day’s costs. Extra folks walked in to purchase snacks on the station’s comfort retailer.

When reached at his workplace, the proprietor and operator of the fuel station, Charles Khalil, stated that there’s no financial thriller behind his costs: folks procuring across the Beverly Middle are simply prepared to pay.

He’s operated the placement since 1990 and saved the costs above common for the reason that starting. “I at all times saved my pricing even, my profitability and all the things even, 30 years to in the present day, at all times the identical,” Khalil stated.

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With land so precious, his mortgage funds are excessive, he stated, and after his franchise settlement expires in just a few years he expects he’ll promote. “It doesn’t pay to be a fuel station with the worth of the land” in the midst of a procuring district.

Jesse Espersen of Topanga fills his SUV with 16.5 gallons of Tremendous+ fuel at 7.559 per gallon for a complete of $125 on the Mobil station at La Cienega and Beverly boulevards.

(Robert Gauthier / Los Angeles Instances)

Khalil stated that he has been within the fuel station enterprise for greater than 50 years, having taken a job at a station quickly after transferring to the U.S. from Lebanon within the late Nineteen Sixties. At the moment, he owns two — the La Cienega station and one other on Westwood and Santa Monica — however his actual enterprise is working a nationwide comfort retailer advertising and marketing consulting agency out of his workplace in Torrance. In that position, he negotiates with massive firms reminiscent of Coca-Cola and Frito-Lay on behalf of impartial shops to purchase snacks and drinks at higher costs.

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However charging a premium for gas has labored for Khalil, he says. “I’ve by no means had issues” transferring gasoline, he stated. He famous that he charged extra typical fuel costs in Westwood as a result of the market there wouldn’t help the upper charges.

Nearly all of his income comes from the comfort retailer, not gasoline gross sales; even on the costs he fees, he stated, fuel has a reasonably low revenue margin in contrast with snacks and drinks, as soon as maintenance, labor prices and taxes are factored in. He stated he holds onto his two areas partially to function take a look at websites for his consulting agency, to raised perceive how new merchandise play available in the market.

“It’s a fairly good metropolitan location,” Khalil stated, with a mixture of upper-class consumers and individuals who work at shops and eating places close by. “You will have a combo of each worlds, and you may inform if a product goes to make it.”

Operating on empty

“As a result of my automobile’s on E.”

That’s what Larry stated whereas placing $10 into his SUV on the Chevron at 901 N. Alameda St., throughout from Olvera Avenue in downtown L.A., the place a gallon of standard fuel price $7.05.

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Like Larry, the general public who stopped by the station didn’t fill their tank up all the way in which, as a substitute placing $10 on pump 5, $20 on pump 3 or $13 on pump 1.

Larry, who declined to offer his final title, stated it was the one station he knew that was shut by and that he usually wouldn’t cease there except he was determined. “I do know different fuel stations, however they’re out of the world,” he stated.

Staffers on the station stated that they might not communicate to the media, however public data present that the proprietor is Hawk II Environmental Corp., run by a Whittier man named Joe Bezerra Jr. He didn’t reply to a number of requests for remark.

Shortly after Larry’s cease, Sal Morales pulled into the Chevron along with his transferring truck for a similar motive: he was working out of fuel and picked the primary station he noticed.

Morales stated his firm pays for his fuel, though he’d need to restrict himself because of the exorbitant costs. “My max is just $150, so I’ll in all probability simply get like half a tank,” he stated.

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On his personal dime, Morales is extra even handed about the place he fills his automobile. He stated he prefers Arco or Costco as a result of their costs are usually cheaper, and he often makes use of apps reminiscent of GasBuddy to search out the most affordable worth per gallon.

“Even filling my very own automobile prices much more than traditional,” he stated. “If I’m in a sure space I’ll attempt to discover the most affordable station, but when not I gotta do what I gotta do.”

Discovering a buyer on the station the place Fairfax, Olympic and San Vicente meet proved harder. The Shell station usually has the very best costs in your entire metro space, and in accordance with public data is operated by Sinaco Oil, an organization that additionally owns a lot of different fuel stations, together with one at Nationwide and Sawtelle. The house owners of Sinaco Oil didn’t reply to requests for remark.

Over the course of an hour, extra folks used the station as a cut-through to skip an extended gentle than to fuel up for $6.99 a gallon. Three TV information digicam crews stopped by to shoot footage of the station’s signal as B-roll.

Donnell Garcia, in a Honda Civic, pulled as much as a pump however didn’t attain for a nozzle. He simply had to make use of the lavatory, he stated. “This place is ridiculous.”

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A person in a Toyota Tacoma TRD received just a few gallons and began driving away. Whereas ready to enter site visitors, he yelled from his window, “These costs are loopy!” However he didn’t have time to go off his path to get cheaper fuel.

One commuter did are available in for the standard fill-up. Brooklyn Barrett stated that she was driving again house to downtown after ending her shift on the Alfred Tea Room close to Melrose Place.

The fuel gentle in her Honda CR-V had simply turned on. “I didn’t see the worth once I pulled up, however I additionally didn’t need to run out of fuel,” she stated, noting the worth of a gallon is “half of my hourly wage.”

She stated life in L.A. had solely been OK since she moved right here final yr. “It’s not the place I need to be precisely,” she stated, “particularly with fuel being the place it’s — and I’m poor.”

“How way more costly is that this than locations close by?” she requested. When knowledgeable of the practically $1.50 worth differential, she sighed. “In fact I cease at this one.”

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Instances workers author Kenan Draughorne contributed to this report.

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L.A. influencers, businesses live or die on TikTok's algorithm. Now they fear for the future

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L.A. influencers, businesses live or die on TikTok's algorithm. Now they fear for the future

Brandon Hurst has built a loyal social media following and a growing business selling plants on TikTok, where a mysterious algorithm combined with the right content can let users amass thousands of followers.

Hurst, who’s based in the San Fernando Valley, sold 20,000 plants in three years while running his business on Instagram. After expanding the business he launched in 2020 to TikTok Shop, an e-commerce platform integrated into the popular social media app, he sold 57,000 plants in 2023.

He now conducts business entirely on TikTok and relies on its sales as his sole source of income. Hurst, 30, declined to say how much he makes.

Hurst also posts content about plant care for a 186,000-person following on TikTok. He’s one of thousands of content creators who engage with an audience on the app and make money doing it — whether by selling products or partnering with brands.

But Hurst, along with many other creators and influencers, is now wondering whether Washington could threaten the progress he’s made with his business.

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After President Biden signed a bill into law that would ban the Chinese-owned app in the U.S. unless it is sold to an American company, social media experts said the economic effects would extend beyond individual creators such as Hurst.

TikTok has advantages that set it apart from other platforms such as Instagram and Snapchat, Hurst and other creators said.

“What makes TikTok special is the algorithm,” Hurst said, noting that if TikTok’s owners sell the app, the algorithm could change.

As with other social networks, TikTok uses a secret algorithm to determine which videos to show to each user, based on what they’ve seen before and with whom they have interacted. What sets it apart is the videos are usually short, informal and designed to entertain, and many spark conversations among creators.

Many small businesses prefer TikTok because of its informality — they don’t need a big production budget to showcase their products or services. They just need a good hook to grab viewers, and once they’ve gone viral a time or two and established their niche, TikTok will bring the viewers to them.

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A ban on TikTok would have cascading effects — especially in Los Angeles, where so many influencers live and work. The Hollywood apartment complex 1600 Vine, for example, is considered by many to be a headquarters for content creators.

That address isn’t the only hub for TikTok stars. Another group lives in a Beverly Hills home dubbed the Clubhouse. If TikTok is banned in the U.S., many creators would lose large portions of their business, they said.

But a sale doesn’t solve every problem either. Some players are already lining up to buy the app even though it’s not yet for sale. And creators such as the Clubhouse residents, who make content as their full-time job, fear a new TikTok ownership could make it harder to attract an audience.

Any ban is expected to face legal challenges and delays, and TikTok executives have said there will be no immediate effect on the app.

Roughly 7 million small-business owners and 1 million influencers rely on TikTok for their livelihoods, according to Rory Cutaia, chief executive of Verb Technology, which owns a livestream social media shopping platform that has partnered with TikTok Shop.

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The platform Market.Live helps small-business owners launch on TikTok, where they also often post videos about their products. TikTok Shop receives around 6,000 applications from small businesses each day, Cutaia said.

Banning TikTok would send ripple effects through the economy because it’s become a primary platform for emerging companies, he said.

“You’re probably talking about billions of dollars that would be removed from the economy,” Cutaia said. “The entire world of retail has changed completely. Today, you need to be distributing your products through social media.”

People calling for the banning of TikTok attend a news conference at the Capitol in Washington, D.C., on March 23, 2023.

(J. Scott Applewhite / Associated Press)

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Adam Sommers, who owns Willow Boutique in Cincinnati, Ohio, with Chelsea Sommers, said TikTok leveled the playing field for small businesses. His was one of the first to sell merchandise on TikTok Shop.

“Everybody had an opportunity to become the next giant in their industry,” Sommers said. “A lot of people have scaled probably beyond their wildest dreams.”

Influencers don’t need to own a business to make money on TikTok, one creator said. They also don’t need to have huge followings to make significant profits, according to Denise Butler, chief operating officer at Verb Technology.

“TikTok very uniquely sets up a content creator to build community and provides amazing exposure,” said Payton Reed, a lifestyle blogger based in Memphis, Tenn., with around 16,000 followers. “When I first started blogging and creating content, I didn’t realize that it could eventually turn into a career.”

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Reed makes money sharing links to other products. She was able to help support her husband financially through medical school with her content creator income, she said.

For small-business owners, TikTok Shop makes it “frictionless” to sell and buy products on the app, Butler said. Users can shop while watching a relevant video, interact with others who have purchased the product and complete the purchase without leaving the app.

Although some say TikTok is superior to other platforms for its e-commerce functionality, not everyone relies solely on the app.

Adam Waheed, a sketch-comedy content creator based in Los Angeles, said it’s important to have income from more than one platform. He made around $11 million last year across his social media platforms, including Instagram, YouTube, Snapchat and Facebook.

“We’ve worked so hard to build these platforms,” Waheed said. “I think for certain creators who rely more on TikTok, it’s going to be much more of an issue,” he said of the potential ban.

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TikTok users in L.A. include small-business owners, content creators and everyday users who can engage with millions of personalities and products. The app is its own local economy, and a ban would leave a gaping hole, creators said.

According to a study from TikTok and Oxford Economics, 890,000 businesses and 16 million people actively use TikTok in California. Forty percent of small to midsize businesses in the state said TikTok was crucial to their business.

TikTok also released national economic data showing the app drove $15 billion in revenue for small businesses.

“More than half of small-business owners say TikTok allows them to connect with customers they can’t reach anywhere else,” the report said.

Content creators and the companies that work with them aren’t the only ones concerned about a potential TikTok ban. Sen. Laphonza Butler (D-Calif.) recently wrote a letter to Biden urging him to consider how a ban would affect laborers.

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“Approximately 8,000 people work for TikTok in the United States, concentrated in California and New York,” the letter said. “Their employment and the livelihoods of their families hang in the balance.”

The senator said a ban would harm small-business owners, contractors and other workers, including janitors and servers who help businesses run.

“We need to be taking the time to consider the broader economic impacts,” she said in an interview with The Times. “There are thousands of workers who I think are not being considered.”

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Arizona's economy is booming. But Biden struggles to reap benefits from voters

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Arizona's economy is booming. But Biden struggles to reap benefits from voters

Aaron McDonald thinks back to when he came to Maricopa County nearly 20 years ago as a young ironworker hoping to get work building a new football stadium.

Driving in from Wyoming for the first time, he was struck by the overwhelming desert expanse that surrounded Phoenix.

Today, those sweeping vistas are dotted with industrial development that is transforming Arizona’s economy. A region that was devastated by the 2008 financial crisis is teeming with massive projects under construction, fueled in part by President Biden’s signature legislative accomplishments aimed at rebooting American semiconductor production.

“There was a shooting range there. It was the Wild West and now there’s a giant chip factory out there,” said McDonald, who now trains union ironworkers, referring to an enormous complex of plants being built in northern Phoenix by TSMC, the Taiwan Semiconductor Manufacturing Co. “The growth, to me, just really doesn’t seem like it’s gonna slow down at anytime. We know we have Biden to thank for this work.”

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The question for Biden’s reelection team is whether enough voters in this battleground state will feel the same way in November.

His administration has awarded billions of dollars to companies such as Intel and TSMC and hopes that the enormous investments in green technology and semiconductors can make a difference in a state where Biden bested President Trump by a mere 10,000 votes in 2020.

But recent polling points to the challenges in winning over those voters.

The Inflation Reduction Act, the Bipartisan Infrastructure Law, and the CHIPS and Science Act will ultimately send about $24 billion to Arizona, according to data compiled by the White House.

But a majority of Americans recently surveyed nationally said they didn’t know enough to say whether the Inflation Reduction Act helped or hurt them in the two years since its passage, according to recent polling from the Associated Press-NORC Center for Public Affairs Research. And a majority of registered voters in Arizona thought Trump was “more trusted” than Biden to address the economy and immigration, a recent Bloomberg/Morning Consult poll found.

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Intel has greatly expanded its operations at plants across the country including the Ocotillo campus, in part because of the CHIPS and Science Act.

(Ash Ponders / For The Times)

TSMC has committed to spending $65 billion in the state building facilities in the next decade, on top of the roughly $11 billion in loans and grants it recently received from the U.S. Department of Commerce. The company has said its new facilities, when completed, will create 6,000 permanent and roughly 20,000 temporary jobs.

“When you drive to the north, or you drive to the south, you see what my wife calls the cranes of prosperity. And they are very prominent,” said Zachary Holman, an engineering professor at Arizona State University.

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Intel is similarly expanding its footprint in Arizona, where it had been pulling back its presence as recently as a decade ago. It received about $10 billion from the Commerce Department, adding to the nearly $20 billion it plans to spend to expand its presence.

But with many of the new jobs arriving years in the future, more immediate concerns such as soaring rents, rising consumer prices and the crisis at the Arizona-Mexico border are capturing most of the attention.

Trump and his allies hope things stay that way, even as they wrestle with voter anger over the state Supreme Court decision banning virtually all abortions. The Legislature voted to undo the law with some Republican support.

“Arizona voters are ready to turn out for President Donald J. Trump this November,” said Rachel Lee, a spokesperson for the Republican National Committee. “Joe Biden is losing in the state, and he knows it. Despite Biden’s best attempts to gaslight voters, they know exactly who is to blame for soaring costs, a spiraling border crisis, and staggering crime rates across the country.”

Chandler Mayor Kevin Hartke  at Intel's Ocotillo Campus in Chandler, Arizona on March 20, 2024.

Chandler Mayor Kevin Hartke makes remarks before President Biden takes the stage during his campaign stop in the city.

(Alexandra Buxbaum / Associated Press)

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Kevin Hartke, the Republican mayor of nearby Chandler, said the investment in his city has been a godsend, while noting that it has been a bipartisan boost across multiple administrations — making it hard for Biden to own this growth exclusively.

“Your common person here is going to complain more about the cost of gasoline, the effect of inflation and certainly the housing crisis,” Hartke said. “I think those areas where there is more of ‘this hits me’ concerns as people struggle to keep up with those kind of growing prices.”

In addition to expanding semiconductor production, the money has gone toward renovating Phoenix’s airport, expanding the 10 Freeway through the region and planting more trees in the city.

“The last four years have been transformational for Phoenix,” said Mayor Kate Gallego, a Democrat. “We are going to have a more diverse high-wage economy for a generation because of Biden. My job is to help people appreciate the change we’re going through and how it means that they will have more opportunities to stay here.”

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This showering of money didn’t seem to register for Gabi Zander, 34, who was at a recent farmers market with her mother in Phoenix’s Uptown neighborhood. Zander, who has lived in the area for more than a decade and works in marketing, said she is focused on the rising cost of living and the war in Gaza.

The recent ruling banning virtually all abortions in the state, since overturned, angered her. But the larger state of politics has her down and she’s unsure she’ll even vote.

“I just wish politicians would spend more time thinking about how to make the city more livable and get more funding for teachers,” Zander said. “I wish they would leave us alone.”

An Emerson College poll showed Biden trailing Trump in Arizona 44% to 40%, with Robert F. Kennedy Jr. at 9%. A more recent poll from Data Orbital, a Phoenix analytics and survey firm, found Biden and Trump at 38% with Kennedy at 14%.

Steve Sherman, production engineering manager for Saras Micro Devices in their new headquarters in Chandler, Az.

Steve Sherman, production engineering manager for Saras Micro Devices, it its new headquarters and production facility in Chandler.

(Ash Ponders / For The Times)

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The Biden campaign has identified some combination of Arizona, Pennsylvania, Nevada, Michigan, Wisconsin and Georgia as essential to the president’s reelection.

In 2020, Biden became the first Democrat to win in Arizona since President Clinton in 1996. The last Democrat to prevail here before that was President Truman in 1948.

The state has been a player in semiconductors for decades, with Intel’s presence dating back nearly 40 years.

Companies say they are able to produce these chips far more cheaply in places like Taiwan, South Korea and Japan, but the COVID-19 pandemic and emerging tensions with China have led government and private-sector officials to revive domestic production. This was the impetus for the $52-billion CHIPS and Science Act, which Biden signed in the summer of 2022. (CHIPS stands for Creating Helpful Incentives to Produce Semiconductors.)

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Much of the money — $39 billion — will come in the form of grants and tax breaks to Intel and other companies. The other $13 billion will go to research and training.

Arizona was a natural destination thanks to its open spaces and affordable land, favorable business climate and the fact that many of these companies already had a presence in the region. Intel and TSMC had already committed billions to construct new manufacturing facilities before they received government grants and tax breaks in the last year.

“Some of these companies were starting to move” to the region, said Eelco Bergman, the chief business officer of Saras Micro Devices. “I think where things like the CHIPS Act helped is they took that spark and threw some kindling on the flame.”

Saras Micro Devices is moving its headquarters and production facilities like this clean room from Georgia to Arizona.

This Saras Micro Devices space in Georgia is moving to Arizona because of benfits from the CHIPS and Science Act.

(Ash Ponders / For The Times)

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Bergman and his partners have relocated their manufacturing facility to be close to Intel’s facility in Chandler. Saras is spending close to $200 million on upgrading a building and purchasing the equipment to produce components that can be sold to semiconductor manufacturers, Bergman said.

The business ecosystem is thriving, he added, because of heavy investment and being in close proximity to schools like Arizona State University, which graduates 7,000 engineering students a year. Intel hires more people from ASU than any other school in the country, and there’s a shortage of people skilled in the disciplines necessary to work in these industries, according to the company.

However the politics ultimately play out, the region has seen a monumental shift from an economy based in real estate and tourism into one heavily layered with future-facing manufacturing. Some of the investment predated Biden, but it was supercharged during his term.

“No one is getting total credit for the big picture of the success story … because it’s happened over such a long period of time,” said Rep. Greg Stanton, a Democrat and former Phoenix mayor. “The more interesting political question is, in the short run who gets credit for the United States finally having an industrial policy that’s been missing for such a long period of time where we finally respond to the challenge that is China?

“I think President Biden is going to get appropriate credit for that. Arizona has and will better benefit from the CHIPS and Science Act than any other state,” Stanton said.

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Ironworkers like those McDonald is training are bouncing from job site to job site, watching outsize warehouses and manufacturing sites rise from the desert. The work is dangerous and can be chaotic, but it’s creating a future for people like Shawna Irwin, 25, who is originally from the Navajo reservation in northeastern Arizona.

Her late uncle — an ironworker — inspired her to enter the field. She later enrolled in a training program sponsored by the Ironworkers Local 75 and run by McDonald. The roughly four-year program — sometimes called the University of Iron — has ballooned to nearly 250 ironworkers who get supplemental training as they continue to work on job sites. McDonald would like to be training 500 ironworkers at the facility he manages by 2026.

“It opened a lot of doors for the unions,” Irwin said, “and for us there was a lot more work because of [Biden] funding the chip plants.”

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TikTok sues U.S. government, saying ban violates 1st Amendment

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TikTok sues U.S. government, saying ban violates 1st Amendment

TikTok, the popular social video app, sued the U.S. government on Tuesday, saying the country’s new law that could ban the app violates 1st Amendment rights to free speech.

President Biden last month signed into law a bill that would effectively ban the service in the U.S. if its Chinese owner, ByteDance, does not sell TikTok’s U.S. operations. Legislators backing the law said a ban or sale was necessary to address national security concerns posed by the app’s ties to China.

“There is no question: the Act will force a shutdown of TikTok by January 19, 2025, silencing the 170 million Americans who use the platform to communicate in ways that cannot be replicated elsewhere,” TikTok and ByteDance said in their filing, referring to the new law.

The Department of Justice declined to comment.

TikTok and ByteDance said in the court filing that it had been trying since 2019 to work with the U.S. government’s Committee on Foreign Investment to address security concerns. Under the terms of a deal spelled out in a 90-page draft agreement, data collected about Tik Tok users in the U.S. was to be handled by Oracle, the U.S. tech giant. The proposed agreement also called for Oracle to inspect TikTok’s programming code for vulnerabilities and for the platform’s content to be subject to independent monitoring, according to the filing in the U.S. Court of Appeals for the D.C. circuit.

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If TikTok did not comply, the draft agreement called for the company to be subjected to financial penalties and also included the possibility of suspending TikTok’s operations in the U.S., the businesses said.

“The terms of that negotiated package are far less restrictive than an outright ban,” ByteDance and TikTok said in its filing.

But TikTok and ByteDance said it is unclear why the committee ultimately determined the proposed agreement was insufficient and in March 2023 “insisted that ByteDance would be required to divest the U.S. TikTok business,” according to the filing.

TikTok and ByteDance also noted the new law “offers no support for the idea” that TikTok’s Chinese ownership poses national security risks.

“Speculative risk of harm is simply not enough when First Amendment values are at stake,” the businesses said in their filing.

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TikTok is still moving forward with addressing some of the security concerns by partnering with Oracle “on the migration of the U.S. platform and protected U.S. user data to Oracle’s cloud environment,” TikTok and ByteDance said in the filing.

As part of their lawsuit, TikTok and ByteDance are seeking a court order blocking the government from enforcing the new law.

“These are going to be difficult issues to thrash out,” said Carl Tobias, a law professor at University of Richmond.

Tobias said one of the challenges for TikTok and ByteDance is the government’s national security argument. “Federal courts tend to be pretty deferential to those kinds of assertions, especially from Congress,” Tobias said.

Other legal experts said that they believe TikTok has a strong case. Douglas Mirell, a partner at Greenberg Glusker, said that he suspects the government is going to have a significant burden of trying to prove the law is not unconstitutional under the 1st Amendment.

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“If I had to choose which side of the case to be on, I would be on TikTok’s side,” said Mirell, who focuses on 1st Amendment issues.

TikTok is a hugely popular app, with more than 1 billion users worldwide and is a key part of the video creator ecosystem. Small businesses rely on TikTok to tout their products and video creators have moved to L.A. to be closer to its Culver City office. The company employs roughly 500 people in Culver City, according to city data.

In its filing, ByteDance argued that carving out TikTok’s U.S. operations from the rest of the company would not be feasible, in part because of the borderless nature of the social video app that allows for international content to be mixed in with U.S. videos.

“Such a limited pool of content, in turn, would dramatically undermine the value and viability of the U.S. TikTok business,” the filing said.

TikTok’s massive popularity — and value — is due in large part to the algorithm its developers designed that seamlessly feeds content to users based on what they have watched previously. TikTok and ByteDance said in its filing, the “Chinese government has made clear that it would not permit a divestment of the recommendation engine that is a key to the success of TikTok in the United States.”

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Still, analysts said have predicted that some companies and private equity firms would be interested in buying TikTok even if the coveted algorithm wasn’t part of the deal. Potential buyers could include Oracle and Microsoft, said Daniel Ives, a managing director at Wedbush Securities in an interview with the Times last month.

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