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Will Arizona Become the Nation’s Semiconductor Hub?

June 2, 2021
The state is attracting a host of new high-tech and semiconductor manufacturers that want to take advantage of all it has to offer.

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As organizations worldwide continue to grapple with a critical shortage of semiconductors plus myriad other supply chain disruptions, Arizona is positioning itself as a high-tech manufacturing hotbed. “Arizona has rapidly become an epicenter for electric vehicle and self-driving tech,” CNBC reports, “and it’s now the site of three big new semiconductor factories as the U.S. struggles to increase production during the global chip shortage.”

According to the Arizona Commerce Authority, a total of 634 companies have either relocated or expanded their footprints in the state since 2015. Some of the more notable names include Intel and Taiwan Semiconductor Manufacturing Co., plus electric vehicle companies Lucid Motors, ElectraMeccanica, Nikola and Atlis Motor Vehicles, CNBC says.

Some of Arizona’s key attractors include its fairly close proximity to Silicon Valley, a steady stream of new college graduates and a business-friendly environment that includes initiatives—some of which are particularly alluring for high-tech companies—designed to attract new businesses.

“In 2020, Phoenix attracted more residents than any other U.S. city for the fourth year in a row,” CNBC reports, “as highly skilled remote workers flocked to the lower cost of living and wide open spaces of the Grand Canyon State.”

Wide Open Spaces

In late 2020, two new Intel fabs and the new TSMC fab all selected Arizona as a hub for rebuilding state-of-the-art semiconductor manufacturing capability in the U.S. According to Forbes, these fabs join four other Intel fabs (fab 12, fab 22, fab 32 and fab 42) at the company’s Ocotillo facility plus fabs from Medtronic, NXP, Microchip and others. “Samsung is also evaluating a new fab site and Arizona is in the running,” Jim McGregor writes.

In Arizona, semiconductor fabs typically find five key attractors: available land, infrastructure (power, water, etc.), skilled talent, no natural disasters and favorable tax incentives.

“Motorola and other early semiconductor companies established Arizona as a leader in semiconductor design and manufacturing in the 1950s,” McGregor writes. “Since then, the universities, utilities

 and government have continued to improve the infrastructure and talent necessary for semiconductor manufacturing.”

Going Where it’s Cheaper

In "Why Are Semiconductor Fabs Dotting Arizona, the “Silicon Desert?”  Luke James writes about how mounting expenses in Silicon Valley are pushing corporations and their employees to find more economical places to set up shop, work and live. “Known for its lower cost of living, lower personal and corporate taxes, more affordable housing, and fewer regulatory hoops,” he writes, “several major semiconductor manufacturers have announced plans to build manufacturing facilities in the Phoenix area and beyond.”

Current projects include TSMC’s plan to build a $3.5 billion semiconductor fab in Arizona, where the company says it will create 1,600 new jobs at a site where production is set to begin in 2024. Once in place, the plant will produce 20,000 wafers per month with a 5 nm process.

“TSMC supplier LCY, one of the world’s biggest producers of chemicals for semiconductors, is also considering building a U.S. plant in Arizona,” McGregor writes. If this happens, the plant will be finished by late 2023.

And, Samsung has filed documents with authorities in Arizona, New York and Texas seeking to build a semiconductor fab, which is expected to create 1,800 jobs at the cost of $17 billion. “Depending on where Samsung decides to build,” McGregor writes, “the fab could be online by as early as Q4 2023.”

Phoenix Could be the Epicenter

If AZ Big Media’s predictions are on target, Phoenix could soon become the epicenter of semiconductor manufacturing, both for Arizona and even for the nation as a whole. It says the city’s history with semiconductor companies dates back to 1949, when Motorola opened a facility in the region. 

Right now, semiconductors and other electronic components represent Arizona’s and the Phoenix metro area’s largest export category, totaling $3.5 billion in 2019 and $2.9 billion in 2018, the publication reports. And, Greater Phoenix is home to 22,203 semiconductor and related device manufacturing jobs, with the average wage in the industry at $135,345.

“Thanks to a large existing cluster of industry-leading firms and recent major announcements—such as Taiwan Semiconductor Manufacturing Co.’s $12 billion and Intel Corp.’s $20 billion chipmaking plants,” AZ Big Media points out, “the Greater Phoenix metro is poised to become a major player in America’s semiconductor manufacturing industry.”

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.