Arizona, over the past three years, has scored some huge victories in luring major semiconductor investments to the state, including a major Intel Corp. expansion in Chandler and the construction of three new factories in north Phoenix by Taiwan Semiconductor Manufacturing Co.

Could all this be the prelude to an even bigger second act?

“There is critical mass — that’s the opportunity we have now in Arizona,” said Brian Harrison, president of TSMC Arizona. “We have a great opportunity to do even more in the next 10 years.”

Harrison described how the company’s factories or fabs in Taiwan have become hubs around which chemical suppliers, tool-equipment makers and other businesses have clustered. His comments came during a “Silicon Desert” forum hosted by EMD Electronics, which supplies equipment and provides testing services to semiconductor customers in Arizona and elsewhere.

The demand for semiconductors remains on a growth track, fueled by consumer products such as cellphones and computers, automobiles, data centers, and pretty much every other modern electrical device or industry. Artificial intelligence has provided new impetus.

A rising percentage of chips now are manufactured abroad, mainly in Taiwan, and reversing that trend has been the thrust of the CHIPS & Science Act of 2022. Under that legislation, the U.S. Commerce Department so far this year has awarded up to $8.5 billion in grants to Intel and $6.5 billion to TSMC, along with $162 million to Chandler-based Microchip Technology and other recipients.

Semiconductor manufacturers are using that money, combined with pledges for billions of dollars more in low-rate federal loans, to leverage their own investments.

TSMC’s planned Arizona investments have risen to $65 billion, along with $20 billion in recent new commitments by Intel. Those have helped to boost total semiconductor investments in Arizona to more than $100 billion over the past four years, said Sandra Watson, president and CEO of the Arizona Commerce Authority and another speaker at the forum hosted by EMD Electronics, a business of German science and technology giant Merck KGaA.

Planning began before passage of key federal legislation

Arizona has fared well lately in this regard partly because of advance planning, Watson said. In 2021, a year before the CHIPS Act was enacted, the Commerce Authority brought together more than 50 industry leaders from various states, along with educational institutions such as Arizona State University and others, to develop a strategy. “We were able to establish a very strong plan,” Watson said, with collaboration the key.

Harrison echoed that sentiment and noted that TSMC considered many other locations in various states for its factories or fabs. Many of these other places had “different factions with their own vague agendas,” he said, rather than a unified gameplan like Arizona. “Everyone has water and roads,” he quipped.

More Arizona-focused technology announcements will be forthcoming, said Watson and Sean Fogarty, vice president of international business development at the Greater Phoenix Economic Council.

“We have a healthy pipeline of prospects” that are considering expansion here, with foreign businesses representing about one-third of those companies, Fogarty said.

Arizona already features a deep supplier base, a pro-business environment, favorable tax policies and an expanding workforce, Fogarty said. All that complements an educational system that is ramping up to funnel workers into the industry, from engineers at Arizona State University and the University of Arizona to technicians receiving training through the Maricopa Community College system and other programs. In addition, Arizona continues to add population, with many of the newcomers in the prime 18-to-44 working-age group, Fogarty said.

The power to make chip-expansion happen

Another critical consideration is the electricity to power these new industrial complexes, as well as related industries such as data centers, of which metro Phoenix now has one of the highest concentrations in the Western Hemisphere.

The EMD Electronics conference included assurances from both of the major electric utilities operating around metro Phoenix that power will be available when expansions get up and running.

“We are aggressively (adding) new resources over the next five years,” said Karla Moran, manager of economic development at Salt River Project. That includes more solar generation, mobile-home-sized batteries to store power early in the morning for release later in the day, and additional pumped-storage hydro capacity.

Kelly Patton, economic development manager at Arizona Public Service, said much the same. “We have prepared for this growth,” she said.

Both utility executives made the case for continuing to keep natural gas-fired plants in the mix for a while longer, despite emissions that make them targets for criticism from environmental groups and others. “If a monsoon hits and the solar field goes down, we can ramp up that natural gas,” Patton said.

Actually, the availability of renewable energy is another factor that gives Arizona an edge, as some companies expanding here, including Apple with its new data center in Mesa, have asked for it, Watson said.

A key factor in the Phoenix area’s success in attracting semiconductor manufacturers and other industries, she added, was ongoing efforts to keep the major utilities in the loop.

Some 54 megaprojects are in the works now across all industries, Watson said, and the Commerce Authority shares that information with local utilities. “We map out what sites they are considering so that our utilities can plan,” she said. “So the utilities know, in the next five years, where they need to be.”

While water is another critical need for the semiconductor industry, conference participants didn’t assess it as a key obstacle for Arizona, especially as manufacturers, including Intel, are striving to improve their recycling efforts. SRP, which supplies about half of the Valley’s water needs, said its reservoirs by later this spring are expected to be near full capacity.

For Arizona’s semiconductor industry, many of the “i’s” still need to be dotted and the “t’s” crossed. The giant fabs and expansion projects still need to be built, equipped and staffed with trained workers, many of whom haven't completed or even started their educations. Suppliers need to be ready and waiting, with fewer of the supply-chain disruptions that have plagued the industry in recent years. Labor relations need to be maintained if not improved. The power and water for these complexes need to keep flowing, and partnerships strengthened.

But the infrastructure and other foundations have been laid and Arizona is in a good position for expansion, said Cori Masters, a senior semiconductor research analyst based in the Valley for Gartner.

“Now’s the time for ramping," she said.

Reach the writer at russ.wiles@arizonarepublic.com.

This article originally appeared on Arizona Republic: Arizona's semiconductor industry is thriving. Here's what's next