Semiconductors barely existed 60 years ago. Now, they’re the backbone of all modern electronics, a major source of American exports and a new catalyst for economic and job growth in metro Phoenix.
Your car drives with them, your smartphone and computer would become paperweights without them, you might have some in your body monitoring blood pressure or insulin, and newer appliances require them.
They power even more advanced applications used by the military, in space exploration, by utilities, in artificial intelligence and in robotics.
Passage of the CHIPS and Science Act in 2022 rejuvenated the U.S. industry, and Arizona has assumed a role of growing significance, landing 18 of the 55 new projects nationally tallied by the Semiconductor Industry Association at the end of the first quarter. The projects include new factories, or “fabs,” along with investments by suppliers and equipment makers.
Gov. Katie Hobbs declared the state to be “the official semiconductor hub” of the U.S., during a recent celebration of one of those expansion announcements, this one by Tempe-based Amkor Technology.
Here’s what to know about the tiny devices, the industry and its growing presence in Arizona.
What are semiconductors? How are they made?
Semiconductors — also known as integrated circuits, microchips or just plain chips — are the increasingly tiny components that power most types of modern electronics — cellphones, laptops and other computers, medical machinery, electric and conventional vehicles, aircraft, military weapons and consumer products.
Semiconductors have become so advanced, and tiny, that some manufacturers can pack billions of transistors, essentially minuscule electrical switches, onto a single chip the size of your fingernail.
The manufacturing process requires hundreds of steps, in which hundreds of copies of integrated circuits are formed on a wafer that’s made primarily of silicon, according to the Semiconductor Industry Association. Essentially, companies melt sand into ingots, from which many layers are added, like dipping a candle repeatedly into wax. Tiny wires, layering of different materials and etching define the electrical connections.
Patterned layers are placed onto wafers, creating distinct regions that are either electrically active or not, as Intel explains. Some material is removed through etching, and some elements are added to change the electrical conductivity. Diamond saws slice wafers, which resemble compact discs, into chips, which are then assembled and packaged into final products.
The process can take a month or more.
Manufacturers use many chemicals in the process, which is also electricity- and water-intensive. Chips must be made in extremely purified “clean rooms.”
Semiconductors are made in factories called “fabs,” and fabs that make products for other companies are called “foundries.”
Making high volumes of advanced semiconductors represents “the most complex manufacturing processes that humans have ever undertaken,” said Chris Miller, a Tufts University associate professor and the author of “Chip War: the Fight for the World’s Most Critical Technology.”
Just how small, powerful and complex are these microchips?
Chips are measured in nanometers. One human hair varies from around 80,000 to 100,000 nanometers in thickness, making the smallest cutting-edge semiconductors invisible without special microscopes.
A chip can contain 15 billion transistors — more than the estimated number of stones in the Great Pyramid at Giza in Egypt, the SIA reports. Transistors, which also can amplify electrical signals, can be “smaller than the size of the coronavirus,” Miller said in a YouTube lecture. This gives your smartphone more than 100,000 times the processing power of the computers that got the Apollo 11 spacecraft to the moon and back, and millions of times more memory.
Why is there a surge in chip manufacturing in the US and Arizona?
For years, semiconductor manufacturing in the United States declined. The COVID-19 pandemic and national defense considerations made it clear that outsourcing manufacturing to other countries had its downside.
Passage of the CHIPS and Science Act in 2022 has sparked investment. The legislation received support from both the Trump and Biden administrations, with Biden signing the bill on Aug. 9, 2022, after a vote of 64-33 in the Senate and 243-187-1 in the House. Both of Arizona’s senators, Mark Kelly and Kyrsten Sinema, voted in favor.
“The act invests $280 billion to bolster U.S. semiconductor capacity, catalyze (research and development) and create regional high-tech hubs and a bigger, more inclusive STEM workforce,” said researcher McKinsey & Co., referring to jobs in science, technology, engineering and mathematics.
The legislation committed $39 billion in incentives for U.S. semiconductor manufacturing.
Arizona has benefitted in a big way and has emerged as a major player in the industry.
“Arizonans will see thousands of high-paying jobs, many of which will not require a four-year degree, (along with) stronger supply chains, lower costs and a more competitive economy for the generations to come,” Kelly, a Democrat, said at the time.
Which companies connected to Arizona benefited from the CHIPS Act?
Many companies will be direct or indirect beneficiaries. Among the biggest are Intel Corp. and Taiwan Semiconductor Manufacturing Co.
Intel, which has manufactured semiconductors in Arizona for years, announced a $20 billion expansion of its south Chandler complex in 2021 — at the time the largest private investment in Arizona’s history. The company later upgraded it to $34.5 billion, including investments in three other states.
In March 2024, Intel received tentative approval for up to $8.5 billion in funding under the CHIPS Act to support the company’s $34.5 billion investment here, along with others in New Mexico, Ohio and Oregon. However, the company later announced it would lay off 15% of its staff, which would equate to job reductions of around 1,800 people in Chandler if the cuts are applied across the board.
Intel’s expansion announcements were eclipsed with word that TSMC would build a major plant in north Phoenix — an investment that has ratcheted up to $65 billion. That massive investment — first announced in 2020 but expanded in 2022 — would be enough money to purchase a fleet of more than 700 Boeing 737 jetliners or build about 90 State Farm Stadiums, home of the Arizona Cardinals.
TSMC received a tentative $6.6 billion in CHIPS Act funding to spur its $65 billion Arizona investment, which is expected to create more than 6,000 jobs at the facility, along with thousands more in construction work.
Both Intel and TSMC also could receive billions of dollars worth of low-interest federal loans.
President Joe Biden visited both facilities within the past two years, most recently Intel in March.
I’m familiar with Intel. What is Taiwan Semiconductor Manufacturing Co.?
TSMC, founded in Taiwan in 1987, now ranks as the world’s most valuable semiconductor company. Its niche is producing semiconductors for the companies that design them but don’t have the capacity or ability to manufacture them.
TSMC manufactures and sells custom integrated circuits and assembles other devices for customers. It provides packaging, testing services and computer-assisted design services.
Taiwan Semiconductor Manufacturing:The company we barely know is an industry icon
By making semiconductors for other companies, it enables those other entities to focus on research and development and other nonmanufacturing operations.
“It helps Nvidia, (Advanced Micro Devices) and all the other guys that don’t have fabs,” said Wendell Huang, TSMC’s chief financial officer, in an interview with The Arizona Republic.
The Taiwanese government is the largest shareholder, but most of the company is owned by foreign investors, including American mutual funds. TSMC is traded on the Taiwan Stock Exchange, the London Stock Exchange and the New York Stock Exchange.
The stock’s symbol is TSM on the NYSE. Its headquarters are in Hsinchu City, Taiwan, about 50 miles from the capital Taipei.
As tensions continue between Taiwan and the People’s Republic of China, in the 2020s TSMC committed to expanding operations outside Taiwan, building new fabs in Japan and the United States, with further plans for expansion into Germany.
How big is TSMC? What is TSMC’s net worth?
The company not only is the world’s largest chipmaker, but it’s also the most valuable company in East Asia, making it larger than Sony, Toyota and many other, more familiar corporate names.
In terms of total capitalization, or stock-market value, TSMC ranks ninth or 10th in the world, with the ranking fluctuating based on stock trading and currency fluctuations.
TSMC is worth about $900 billion, or roughly as much as pharmaceutical giant Eli Lilly and a bit less than conglomerate Berkshire Hathaway.
Who is TSMC’s biggest customer?
Apple, the world’s most valuable corporation, also is TSMC’s top customer and will buy semiconductors made in Phoenix.
Who are TSMC’s biggest competitors?
TSMC doesn’t name competitors in its annual report, but industry sources cite Samsung Electronics, Intel Corp., Micron Technology and another Taiwanese company, United Microelectronics, among the main rivals.
Who are other big Arizona chipmakers?
Other big Arizona chipmakers, though not necessarily competing in the same segments as TSMC, include Intel, Microchip Technology of Chandler and Scottsdale-based On Semiconductor.
Microchip is on tap for $162 million in CHIPS Act funding, though this money would support operations in Colorado and Oregon.
Have these expansions attracted other companies?
The Intel, TSMC and other manufacturing announcements have energized an array of suppliers around metro Phoenix, including Amkor Technology, Applied Materials, EMD Electronics, Edwards Vacuum and Fujifilm Electronics Materials.
Their various projects encompass manufacturing, the packaging of chips, research and development and supply chain expansions.
More than 40 semiconductor-affiliated companies have expanded or set up shop here since 2020, representing more than 16,000 new jobs and $102 billion in investments, according to the Arizona Commerce Authority.
Amkor recently qualified for $400 million in funding under the CHIPS Act. The company earlier announced plans to build a $2 billion testing and packaging complex in Peoria, due west of the $65 billion, three-fab campus being constructed in north Phoenix by TSMC.
Will the growing semiconductor industry create jobs in Arizona? What kind?
Engineers are in high demand, and schools like Arizona State University have grown their programs, with about 33,000 students in the Ira. A. Fulton Schools of Engineering.
However, most jobs in the industry are technician positions that don’t require four-year college degrees. Technicians could fill an estimated 60% of new jobs at TSMC and other semiconductor companies.
Enhanced workforce-training programs involving Arizona State University, the University of Arizona, Northern Arizona University, Maricopa County Community College District and others have been set up to train Arizonans.
TSMC also has set up a new apprenticeship program in Phoenix.
How can I get a job at TSMC?
TSMC will be hiring for several years at its new Phoenix plant. Information on openings can be gleaned at https://www.tsmc.com/static/abouttsmcaz/index.htm.
Didn’t Americans invent semiconductors? Then what happened?
Yes. Many American companies played key roles in semiconductor development, with roots tracing back to California’s Silicon Valley in 1939.
But foreign firms such as TSMC took the lead in producing increasingly small and efficient advanced chips. Companies in Taiwan, South Korea, Japan, China and some European nations manufacture chips and important accessories, such as intricate equipment used in the industry.
U.S. companies manufactured 37% of the world’s chips in 1990, but that fell to 10% in 2022.
With new federal funding from the legislation, the U.S. market share is expected to climb modestly to 14% in 2032, according to a projection by the SIA and Boston Consulting Group.
While that doesn’t sound like much, it would mark the first time in decades that the U.S. market share expanded compared with the rest of the world. Without the CHIPS Act, the U.S. slice would have ebbed further to 8%, the researchers contend.
Despite the decline in manufacturing, American companies enjoy competitive advantages in R&D and chip design, and those areas, too, along with domestic manufacturing, will be invigorated by the federal CHIPS Act.
How will AI affect semiconductors?
Artificial intelligence is providing the latest catalyst for the semiconductor industry. This emerging field requires specialized types of chips capable of delivering enhanced computing power, and more of those chips.
“We’ve seen very strong demand for AI-related (devices) and high-end smartphones,” Wendell Huang, TSMC’s chief financial officer, said. “Looking forward, we do expect very strong demand.”
Miller noted that most of the world’s advanced chips used in AI are made by one company on “one small (island) off the coast of China” — a reference to TSMC and Taiwan.
The company’s campus in Phoenix, when fully operational, will feature the industry’s most advanced manufacturing technology on U.S. soil.
Will the industry’s expansion spill over to other industries?
Yes, and it’s already happening.
Housing and retail development has been growing in north Phoenix, around the new TSMC plant, and in south Chandler near Intel’s campus.
The Phoenix Convention Center will host next year’s SEMICON West trade show, a conference that has been held in San Francisco for the past 50 years.
The exhibition, slated for October 2025, could bring around 10,000 to 12,000 attendees, based on recent numbers for the San Francisco events. Hotels, restaurants and other businesses will benefit, with a possible economic impact of around $18 million, based on the Bay Area results. For at least the next few years after that, Phoenix will alternate with San Francisco in hosting SEMICON West.
Are there potential negatives for Arizona?
There could be.
Also, the factories are massive consumers of both electricity and water. TSMC, for example, projects around 4.5 million gallons of daily water use, but critics think the water number could be much higher, in addition to the factories using enough electricity to power around 300,000 Arizona households.
TSMC and Intel both have recycling efforts planned or already implemented. For example, TSMC expects to use millions of gallons a day but plans to recycle most of it.
Semiconductor companies such as TSMC use various chemicals in their manufacturing process, with sulfuric acid and isopropyl alcohol among the biggest by volume. The company aims to convert waste into products that it can reuse or sell to others. The company claims less than 1% of its waste winds up in landfills.
The big local power utilities, Arizona Public Service and Salt River Project, have made projection’s for long-term growth with these and other customers, from data centers to new households, in mind.
Is the chip industry on a growth trajectory?
Definitely.
The SIA and Boston Consulting Group are forecasting that the U.S. will triple its domestic manufacturing capability between 2022, when the CHIPS Act was enacted, and 2032. The SIA also estimates that global semiconductor sales will hit a record $611 billion this year and $687 billion in 2025.
As one indicator of the industry’s prosperity, TSMC’s first-half revenues jumped 28%, and the company earned a profit of roughly 40 cents for every dollar of revenue it generated.
“I wouldn’t bet on a slowdown of innovation,” Miller said in an interview. “Thousands of engineers and billions of dollars are working to keep progress going.”
Reach the reporter at russ.wiles@arizonarepublic.com.
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.
