Mar 2, 2023 - Business

How Phoenix became the "semiconductor desert"

A large crane suspended above a building.

The Taiwan Semiconductor Manufacturing Co. facility under construction in December. Photo: Caitlin O'Hara/Bloomberg via Getty Images

California can keep Silicon Valley. Phoenix has spent the past half-century establishing itself as the "semiconductor desert," a nickname solidified in 2020 when chipmaker Taiwanese Semiconductor Manufacturing Co. announced it would build a $12 billion factory here.

  • TSMC said in December it would open a second factory in north Phoenix by 2026, bringing its total Arizona investment to $40 billion.

State of play: Since 2020, Arizona has led the nation in semiconductor investment, a byproduct of decades of local leaders working to expand the industry, experts tell us.

Why it matters: Semiconductor manufacturing has brought high-wage jobs to the Valley in an field that's both booming and resilient amid U.S. economic swings, because the products that use chips — from cell phones and laptops to automobiles and military jets — are sold globally.

  • The federal government deems domestic chip production a matter of national security. To decrease U.S. reliance on China, it committed $52 billion last year to semiconductor manufacturing and another $200 billion, through the CHIPS and Science Act, for research.

What's happening: Patrick Ptak, senior vice president of executive initiatives at the Arizona Commerce Authority, says TSMC considered all 50 states for its most recent expansion and chose Arizona in part because of its existing semiconductor businesses.

Flashback: Arizona's first big foray into chips development came in 1949 when Motorola opened a research lab in Phoenix that later manufactured transistors, a type of semiconductor.

  • By 1980, Intel opened its first semiconductor factory in Chandler, quickly becoming one of the state's largest employers.
  • Motorola and Intel brought chemical suppliers, engineering outfits and other skilled manufacturing companies to metro Phoenix — many of which have survived and are now reaping the benefits of the Valley's longtime commitment to the chips industry.

Zoom in: One of those companies is ASM, a Netherlands-based manufacturer that develops and builds the equipment that companies like TSMC and Intel use to make semiconductors.

  • ASM opened its North American headquarters in Phoenix in 1976, and has grown its Arizona-based workforce to 750 people, up from fewer than 400 in 2020.

What they're saying: "ASM stayed here and we continued to grow in Phoenix, invest in Phoenix, and we continue to believe in Phoenix ... and we're very excited to see (the city) getting its recognition," chief technology officer Hichem M'Saad says

What's next: Intel's expansion and TSMC's arrival have already lured dozens of new semiconductor suppliers and other complementary companies to metro Phoenix.

What we're watching: Some TSMC employees and global chips experts are doubtful of the long-term success of the Arizona expansion, The New York Times reported last month.

  • Employees said they feared the expansion would distract the company from its research and development focus, which has allowed TSMC to outperform competitors.
  • Some employees also said they were hesitant to move to the U.S. because of "potential culture clashes."

Editor's note: This story has been updated to reflect that TSMC says construction has already begun on a second factory in north Phoenix that it expects to open in 2026.


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