Why semiconductor factories choose Arizona?

Silicon Valley is often considered an ideal place to work and live in the high-tech industry, but in the Bay Area, both companies and workers are spending more, driving people to more economical tech hubs.

As early as 2012, commentators noticed that fabs were gradually disappearing from Silicon Valley. Where have they all gone?

A popular location is Arizona. Several major semiconductor manufacturers, known for their lower cost of living, lower personal and corporate taxes, more affordable housing, and fewer regulatory hurdles, have announced plans to build manufacturing plants in the Phoenix area and beyond.

Here’s a roundup of some of the major chip industry companies that are building operations in the Grand Canyon State, and a brief look at the appeal of the “silicon desert.”

  TSMC

TSMC plans to build a $3.5 billion semiconductor fab in Arizona, one of the biggest wins for Arizona’s silicon business, which it said will create 1,600 new jobs between 2021 and 2029, totaling 1,600 new jobs. The cost is $12 billion.

According to TSMC, the world’s largest foundry, production at the fab should begin in 2024, producing 20,000 wafers per month on a 5-nanometer process (or, if it’s ready now, 4-nanometer) , and reserve 3 nanometers for production.

  Why semiconductor factories choose Arizona?

Figure: The latest progress in TSMC’s logic technology

Although the U.S. government’s pressure to build more fabs in the U.S. led to the decision, U.S. fab production is also a strategic move for TSMC. If anything, it would allow the chipmaking giant to better compete with other U.S. chipmakers such as GlobalFoundries and bid for U.S. government and military contracts.

TSMC supplier LCY, one of the world’s largest producers of semiconductor chemicals, is also considering a U.S. factory in Arizona. The plant, which will be LCY’s largest investment outside Taiwan, should be completed by the end of 2023 if plans are finalized and approved, which is in line with TSMC’s 2024 production target.

 NXP

In the third quarter of 2020, NXP opened its newest fab in Chandler, Arizona – a 150mm gallium nitride (GaN) fab, which the company confidently calls “the most advanced 5G RF power amplifier in the U.S.” fab”.

  Why semiconductor factories choose Arizona?

Pictured: Governor Doug Ducey and other official representatives attend the opening of NXP’s new Arizona GaN fab

The new facility combines NXP’s expertise in GaN development and RF power with high-volume production capabilities by serving as an “innovation hub” for chip development. By establishing the hub, NXP hopes to support the expansion of 5G base stations and develop infrastructure in key markets such as aerospace.

The fab will accelerate the production cycle of NXP GaN devices from concept to proof.

 Samsung Electronics

Recently, Samsung has filed documents with authorities in Arizona, New York and Texas seeking to build a semiconductor fab that is expected to create 1,800 jobs and cost $17 billion.

In a statement to The Korea Herald, Samsung officially acknowledged that the company has yet to make a decision as it explores other potential locations. However, Samsung is said to be negotiating tax breaks and relief with the U.S. states, using the potential $8.9 billion in local economic growth as leverage.

If Samsung can’t negotiate favorable tax breaks with Texas officials (given that Samsung already has a factory in Texas), Arizona may be the next best place because of its generosity in offering tax breaks to tech companies.

If Samsung decides where to build, the fab could start construction as early as the fourth quarter of 2023.

Why choose Arizona?

Why is Arizona quickly becoming the new US silicon wafer production center?

At first glance, there may not be a compelling reason to build a factory in Arizona other than to provide chipmakers with the land they need to build their factories. From the state’s geography, it doesn’t seem like it offers a lot of silicon mines or a better supply chain.

At least that was the case until Intel got there.

Intel was the first chipmaker to bring semiconductor manufacturing to Arizona in 1980.As the years have passed, Intel has expanded its presence by investing heavily in its fab centers, most recently Intel’s Ocotillo silicon wafer campus in Arizona, one of the largest construction sites in the United States

Why Intel chose Arizona is not well known. However, Intel’s positive impact on Arizona’s economy is well documented.

  

Figure: Arizona’s economy benefits from Intel’s manufacturing and will continue to benefit from other companies relocating there

Intel and its suppliers were the first to establish Arizona as a semiconductor manufacturing hub. Others should follow suit, largely due to the already established supply chain and infrastructure in the Phoenix area. Today, several chipmakers and other chip industry companies have operations in Arizona, including ASML, Applied Materials and Nova.

Since Arizona is a viable location for a new chip factory, Samsung may forget about Austin and follow TSMC and NXP in choosing Arizona as the location for its upcoming foundry.

 

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