5 things to know about semiconductors and Arizona
Since the passage of the CHIPS and Science Act in 2022 Arizona has assumed a role of growing significance in the semiconductor industry.
In north Phoenix, a factory is being born. Ringed by mountains and a bald expanse of Arizona desert, red and yellow cranes cast spindly shadows over the cubic skeletons of what will become multistory buildings. The campus, when completed, will span hundreds of football fields.
The factory is big news for metro Phoenix. It will bring thousands of jobs. It’s expected to be a watershed in housing, development, and high-tech expansion. It’s part of a manufacturing boom sweeping the country in the wake of large federal investments.
But in the halls of Congress, the White House, and the Pentagon, it’s also known for a different reason. The Taiwan Semiconductor Manufacturing Co. will make semiconductors, known as “chips,” the silicon morsels present in virtually all electronics. In the age of computers and artificial intelligence, they have become a linchpin of the global economy.
The success of the factory, and others like it, is seen as vital to national security, and one of the existential imperatives that will help maintain the U.S.’ dominance on the world stage.
“You can’t have a strong economy, or a strong defense, without semiconductors,” Arizona State University supply chain professor Dale Rogers said. “And we are in the center of the universe for semiconductors, right here in the Phoenix area.”
Facing heightened competition from China, and growing demand for electronics, reviving America’s chip industry has in recent years been widely recognized as an urgent priority.
Factories like TSMC’s are making Phoenix a nucleus for the building blocks of the country’s economic and military might.
That has brought an unusual amount of attention to what are ordinarily local minutiae of getting a factory off the ground. Concerns like environmental reviews, labor agreements, and staffing shortages have garnered attention from the highest levels in D.C.
The projects, in short, are too important to fail.
Great power competition puts Phoenix on the map
While the Sonoran Desert slept, a message flashed across cellphones halfway around the world: “Incoming missile/rocket threat.”
“Seek immediate shelter.”
Sirens blared and vehicles and people left the streets of Hsinchu, Taiwan as part of a drill against missiles being fired from China.
Phoenix’s semiconductor industry is part of the same globe-spanning geopolitical drama, according to Sujai Shivakumar, a senior fellow with the D.C.-based think tank Center for Strategic and International Studies.
It starts with competition between the great powers. For decades, free trade policies allowed America’s manufacturers to move abroad in search of cheaper labor and more favorable markets. Western powers welcomed emerging economies, like China’s, into global trade institutions, in hopes that the country would become an ally as it integrated into the global economy.
“There was a consensus that things are geopolitically calm, that China is not our rival. It doesn’t matter where things are produced as long as you have efficient value chains that can span the globe,” Shivakumar said. “That led to wholesale offshoring of our industry.”
Several factors changed that view, Shivakumar said. Chiefly, China is now seen as a strategic rival. Its rapid rise as a manufacturing power has allowed it to outcompete America and its allies in global markets.
Over time, American strategists have gone from rooting for China’s economic success to worrying about it.
Those concerns came to a head during the COVID-19 pandemic, when supply chain disruptions created new fears that the now-outsourced manufacturing supply chains could be a vulnerability for the U.S.
Chips were chief among those concerns. The neurons inside the world’s “smart” electronics, chips are unthinkably small – measured on a scale 1 million times smaller than the increments shown on a ruler – and yet they’re a master variable of the global economy. The growth of artificial intelligence has made chips omnipresent in computers, cars, smartphones, medical and military equipment and more.
They’re vital to the most advanced weapons that the U.S. military uses to fight wars. Chips are the brain inside of missiles that can chase their targets, communication devices that allow for coordination around the globe, and satellites that transmit intelligence back home.
“Heavy weapons aren’t nearly as effective as smart weapons,” said Rogers, whose ASU chair is sponsored by the chip company onsemi.
Add to the mix that Taiwan, the island roughly 100 miles off China’s southeast coast which produces the lion’s share of the world’s advanced semiconductors, is facing a military threat of its own.
It’s seen as vulnerable to an invasion from China.
Strategists disagree on if and when China might make that move. But Taiwan, and its allies in the Pacific, are seen as likely to be the first front if conflict between the U.S. and China turns hot.
It’s enough to make American strategists nervous.
“A lot of the chip manufacturing is located along the Pacific ‘Rim of Fire,’” Shivakumar said. “It’s too much concentrated in one very vulnerable location.”
U.S. Sen. Mark Kelly, a veteran who sits on the Senate’s Armed Services Committee, is a leading voice on the issue.
The Arizona Democrat was a chief negotiator of the 2022 CHIPS and Science Act, a massive piece of legislation designed to lure American semiconductor manufacturing with promises of hefty tax benefits, multibillion-dollar grants or loans to help get factories off the ground, and billions of dollars more for research and development.
He has echoed the idea that the factories will reduce the country’s reliance on supply chains overseas.
“Our economy now, I think it’s fair to say, runs on semiconductor chips. We can’t risk losing access to them,” he told The Arizona Republic earlier this year.
Arizona: A ‘second island’ for chip manufacturing?
With Taiwan under threat, Arizona is seen as a “second island” where chip manufacturing can take root.
That originally happened more for economic reasons than geostrategic ones. Arizona was among the hardest hit by the 2008 Great Recession, recalled Danny Seiden, president and CEO of Arizona’s Chamber of Commerce. State leaders were looking for ways to boost the economy aside from housing and real estate development and its famous alliterative selling points: copper, cattle, cotton, citrus and climate.
“We were saying, ‘how can we diversify our economy?’” Seiden said. “What is it that Arizona has to offer, outside of the typical 5 C’s that you always hear about?”
“We realized we could be a manufacturing base.”
Several state leaders helped oversee that change, he said, including former Republican governors Jan Brewer and Doug Ducey and former Arizona House Speaker Kirk Adams. The Arizona Commerce Authority, then a newly formed public-private partnership, played a role in attracting capital, too.
In fairness, Rogers said, Arizona was an “easy” sell.
The state had one of the most reliable power grids in the country. It wasn’t as expensive as neighboring California, where many tech companies are headquartered. Arizona’s Republican-led leadership enticed businesses with tax breaks that made it more hospitable to manufacturers compared with some of its Democratic-run neighbors.
The state’s workforce was attractive, too: Arizona State University provided a trove of faculty and scientists to give businesses cutting-edge intelligence.
Counterintuitively, Rogers added, “as crazy as this is … the cheapest water of any American city is in Phoenix.”
And so, one by one, Arizona ended up with several anchors of the supply chain critical to the United States’ economic and military standing. TSMC announced plans to build three factories in Phoenix, manufacturing high-end chips for customers including the tech giants Nvidia and Apple.
Scottsdale-based onsemi, a tech company formerly known as On Semiconductor, makes the “little chips” needed to supplement smartphones and other devices, Rogers said. Intel is breaking ground in Chandler to produce leading-edge semiconductors that aren’t currently made in the U.S.
Arizona State University, the largest public university in the country, is playing a central role too. It’s helping U.S. manufacturers match the pace of Chinese innovation and keep up with an observation known as Moore’s Law, which holds that the number of transistors on microchips has doubled roughly every two years.
“There is a technology and R&D race going on as well,” Shivakumar said. “So it’s really important that research organizations like ASU … help to maintain the momentum and comparative advantage.”
The year 2022 brought another watershed moment with the passage of the CHIPS and Science Act.
Arizona competed for those dollars, and it succeeded.
The state has seen some of the biggest private investments in state history, a host of workforce accelerators for the chips industry, and Arizona universities have attracted hundreds of millions of dollars in grants.
National security goals hinge on local Arizona issues
Ordinarily, the nuts and bolts of standing up a factory – negotiations over labor conditions, the environmental reviews, and finding and training workers – are dealt with on a case-by-case basis or at the local level.
But the stakes of Arizona’s projects have brought new attention, sometimes from the highest levels of the federal government. It has signaled it will move heaven and earth to develop the staff necessary to build and sustain the semiconductor industry – putting massive sums of money into workforce development and training. And Biden recently signed into law a proposal to exempt semiconductor projects from certain environmental permitting requirements.
Kelly, who sponsored the permitting bill, praised it as “smart, effective policy that will maximize our efforts to bring microchip manufacturing back to America.”
Seiden, head of the Arizona chamber, pointed to the tight timeline to argue against additional regulations.
“If the EPA, for example, is adding regulations on … that will drive up the cost, and that will make companies like TSMC say, ‘Why are we going to the U.S.?’”
Likewise, Shivakumar said, “It can take years for environmental clearances to take place. … We just can’t afford to have those kinds of uncertainty and delay.”
Labor and environmental groups have expressed concern that their priorities will be steamrolled in the name of urgency. The Sierra Club, one of the nation’s largest environmental groups, urged Biden to veto the permitting bill.
“This bill would remove the last remaining federal lever to assess the impact of massive semiconductor fabs on drinking water, air quality, climate change, and community health,” Harry Manin, a Sierra Club legislative director, wrote in a news release. “Public money should serve a public good, and fenceline communities deserve to know how they’ll be impacted.”
The group’s executive director, Ben Jealous, has highlighted microchip manufacturers’ legacy of pollution in Silicon Valley.
“If TSMC continues to cause public harm with public funds, it will demonstrate that the semiconductor industry learned nothing after peppering 23 Superfund Sites into Silicon Valley,” Jealous wrote earlier this year.
The scope of Arizona’s projects mirrors other global epicenters for semiconductor manufacturing, such as the Netherlands, where many chip-making machines are made, and Japan, which, like the U.S., is attempting a semiconductor revival of its own.
“We can’t get left behind on semiconductors,” Rogers said. “It’s really our safety in the long run.”
This is one of a series of articles about Taiwan Semiconductor Manufacturing Co. and the growth of the semiconductor industry in Arizona. Read more on azcentral.com.
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Publish date : 2024-10-14 03:53:00
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