The Rise of the Silicon Desert: Is Arizona Our Semiconductor Savior?

It's no secret. We are in the midst of a global shortage of advanced electronics components—particularly semiconductors. Tech CEOs have not shied away from speaking about the subject, and political leaders have announced new policies to fuel a new wave of semiconductor production.

Arizona is at the center of it all.

Taiwan Semiconductor Manufacturing Company (TSMC) has announced plans to build a 5-nm fabrication in Phoenix, Arizona, and have it running by 2024. TSMC's Arizona goals are lofty ones. The semiconductor powerhouse plans to turn Arizona into an industrial haven for silicon production.

The fab is scheduled to produce up to 20,000 chips per month, while also creating over 1,600 jobs at the fab site. Thousands of industry-relevant jobs are also predicted to be created within the area. TSMC will reach into its pockets and shell out around $20 billion to pay for the fab site.

TSMC is also considering opening 5 more plants in Arizona. Officials at the company are currently in discussions over the plans for the next plant. Word on the street is they are unsure whether to have the new plant focus on advanced 3-nm chip production or continue producing 5-nm chips.

If TSMC plans to focus on 3-nm technology, then the price will be steep. A plant producing these advanced and more efficient chips could cost the Taiwanese manufacturer up to $25 billion. The company also has plans to continue expanding the Phoenix site and begin production on next-generation 2-nm chips within the next 10-15 years.

‍

‍

TSMC isn't the only company with its eyes set on Arizona

An Intel fab costing $10 billion has begun production in Arizona with 300 mm wafers and 7/10 nm nodes being manufactured. Intel's Fab 42 site began production in 2011. The site was originally slated to produce 14-nm chips and was anticipated to be up and running by 2013. Yet by 2014 a downturn in PC sales led Intel to abandon the fab site and produce the 14-nm chips at existing fabs in Oregon.

In 2017, Intel announced its plans to revive the fab site in Chandler, Arizona with a $7 billion investment. The site will be its third fab located in Arizona. The first to open was Fab 12 in 1996, which produces 22-nm chips. The second fab opened in 2007 and produces 22-nm and 14-nm chips.

‍

But for Intel, 3 is not the magic number.

The tech giant has plans in place to build two more fab sites in Arizona to bring the total to 5. The two new sites are scheduled to finish construction by 2024 and Intel plans to invest around $20 billion to get the sites up and running. The goal for Intel is to become a major foundry capacity provider for the US and Europe.

Intel's two new fab sites are projected to create over 3,000 permanent high-tech and high-wage jobs while also creating over 3,000 construction jobs to build the sites and nearly 15,000 local long-term jobs related to the new facilities. Arizona and Biden's administration has announced they will do what they can to "spur this type of domestic investment."

And let's not forget NXP

NXP opened its latest fab in Arizona during Q3 of 2020. The fab produces 150-mm gallium nitride and is labeled as "the most advanced fab dedicated to 5G RF power amplifiers in the United States."

‍

NXP's investment in Arizona serves to establish the company as a hub to support the expansion of 5G base stations and advance infrastructure for key industries. The fab is expected to be at full capacity by the end of 2021 and aims to significantly reduce costs for its customers through reduced sizes of their boxes, radios, weight, and cost.

Why Arizona?

Is it the heat? The dry, arid environment? The casinos?

Or maybe there's just some magical allure about making technological breakthroughs in the desert. Los Alamos and Project Y, anyone?

Jokes aside, big tech has its eyes set on Arizona for five key reasons:

1. Available land
2. Infrastructure
3. Skilled talent
4. No natural disasters
5. Tax incentives

Arizona's ascension as the "Silicon Desert" is not a recent one. The history is there.

The Grand Canyon State became a hotbed for semiconductor design and manufacturing in the 1950s when Motorola made its presence in the desert. Ever since, the local universities, utilities, and political leaders have made an effort to continue improving knowledge, talent, and infrastructure to support critical semiconductor manufacturing.

Additionally, companies like Intel have received favorable local tax incentives to keep them in the desert.

Arizona has also ranked as the 12th least risky state regarding major natural disasters. With a lower risk for disasters, companies like TSMC who make multi-billion dollar investments to build fab sites can rest a little easier knowing their huge investments aren't likely to get torn down overnight by a hurricane or wildfire.

And maybe the rest of us can rest a little easier, too, if all of these newly planned fab sites can pull us out of the current electronics parts shortage.

Sweet dreams.