Ducey, Biden cheer microchip plant, TSMC announces additional investment in Phoenix

Ducey, Biden cheer microchip plant, TSMC announces additional investment in Phoenix

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President Joe Biden greets Gov. Doug Ducey after arriving on Air Force One on Dec. 6 at Luke Air Force Base in Maricopa County. Biden joined federal, local and state officials, as well as industry leaders, in North Phoenix for a “first tool-in” event at a Taiwan Semiconductor Manufacturing Company factory that’s set to start producing microchips next year. (AP Photo/Patrick Semansky)

Local, state and federal officials, including President Joe Biden, as well as industry leaders, descended on North Phoenix on Tuesday for a “first tool-in” event at a Taiwan Semiconductor Manufacturing Company factory that’s set to start producing microchips next year.

“Arizona continues to offer the premier environment for advanced manufacturing anywhere in the world,” Gov. Doug Ducey said in a speech to several hundred attendees.

“As the U.S. semiconductor industry continues to advance in the years ahead, Arizona will be the engine powering its growth,” he added.

Tuesday’s event was billed as an opening ceremony and marked the delivery of high-tech manufacturing equipment to the TSMC plant that’s located just north of the Loop 303 highway and is still under construction.

The long-planned event got a high-profile boost from the White House, which announced last week that Biden would join the officials in Phoenix on Tuesday.

“American manufacturing is back, folks. American manufacturing is back,” the president said.

“The semiconductor chips made right here in Arizona will drive the engines of growth far beyond the northern edge of Phoenix,” he added.

Just hours before the ceremony, TSMC announced plans for a second fabrication plant at the Phoenix site, even before the first plant is up and running. That will bring the company’s total investment in Arizona to $40 billion, more than triple the original estimate. It’s the biggest foreign direct investment in the state’s history.

The first plant has been under construction since last year. The second plant, or “fab,” is set to begin production in 2026. When they’re both operational, the company will have the capacity to produce 600,000 semiconductor wafers per year at the Phoenix site, according to information distributed by TSMC on Tuesday.

The second plant will produce three-nanometer semiconductor chips. TSMC Chairman Mark Liu said that will mean the Arizona site is making the most advanced chips on the market.

“TSMC is committed to building a strong semiconductor manufacturing ecosystem in the United States,” Liu said.

Among other things, the chips will go into Apple iPhones, the company announced recently. Apple CEO Tim Cook was also on hand and gave a speech on Tuesday.

The TSMC project is important for economic and geopolitical reasons.

It’s expected to generate thousands of jobs in Phoenix and attracting TSMC to Arizona was a signature achievement for Ducey, who has staked his legacy on the state’s booming economy, with a particular emphasis on high-tech manufacturing.

“When TSMC set out to build its new high-tech fab, they had all 50 states to choose from,” Ducey noted in his comments.

The company says it will hire 4,500 workers at the two fabrication plants and an economic impact analysis by the Greater Phoenix Economic Council said the work would support another 13,000 jobs at supplier companies. That’s on top of thousands of construction workers who have been at work building the facilities since last year.

In 2020, when TSMC announced plans for the first plant, estimates put the total investment at $12 billion with the expectation to create 1,600 jobs.

Plus, semiconductors have become a strategic frontier in international competition between the United States and China.

The United States is the world’s largest buyer of semiconductors, but China and Taiwan are the principal manufacturers of the chips, which are found in everything from cell phones to refrigerators to weapons systems.

U.S. officials have long worried about relying on chips manufactured in China, a strategic rival, and Taiwan, which China claims as part of its territory. The Arizona plants could help the country move away from that dependence on foreign manufacturing.

“Today, the United States only manufactures about 10% of the world’s (semiconductor chips). Of the best chips in the world, we manufacture 0%,” U.S. Sen. Mark Kelly said in comments on Tuesday. “But today, that is about to change.”

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President Joe Biden listens as he tours the building site for a new computer chip plant for Taiwan Semiconductor Manufacturing Company Dec. 6 in Phoenix. (AP Photo/Patrick Semansky)

For TSMC, the manufacturing outpost in Phoenix could serve to protect the company if the Chinese government takes more aggressive steps to assert control over the island – something it’s been hinting it will do for years.

Morris Chang, who founded TSMC in the 1990s, noted his own past, unsuccessful efforts to manufacture chips in the United States, but said the company is better equipped for success with the Phoenix project. He indicated that the plan to make the company’s products in the US was in part a result of declining support for free trade around the world.

“Because of the changing political situation, the new dream – actually the old dream revised – is to help the US government, the federal government, state government, local government,” Chang said.

The tone at Tuesday’s event was largely congratulatory, but under the surface there was some rhetorical maneuvering over who would take credit for TSMC’s historic plans in Phoenix.

“They chose Arizona because of our robust and growing talent pool, unbeatable business environment, and unparalleled quality of life,” Ducey said, pointing to talking points he’s used to draw major manufacturing businesses to the state, chief among them TSMC.

Democratic officials told a different story about TSMC’s decision to invest in Arizona, highlighting the CHIPS Act, a law Biden signed in August that will provide subsidies to semiconductor manufacturers operating in the US. TSMC is expected to apply for money under the program.

“For years, politicians have talked about bringing manufacturing and supply chains back to our country. Well, now we’re actually doing that,” Kelly said, referring to the CHIPS Act.

The plan for the first factory was announced in 2020, far before the federal legislation. But the announcement of the second plant came just ahead of Tuesday’s event.

Phoenix Mayor Kate Gallego said that the company’s investment in Arizona wouldn’t have been as large without the CHIPS Act, apparently a reference to the plans for the second plant.

And Biden connected the plant to domestic manufacturing and his broader economic policy.

“It’s part of a broader story about the economy we’re building… one that grows from the bottom up and the middle out,” he said.