As referenced in a recent article by The Arizona Republic, the State of Arizona is developing into a major center for semiconductors in the United States. Arizona is currently home to several chip manufacturers, including Intel Corporation, Microchip Technology Inc., and Taiwan Semiconductor Manufacturing Company Limited. And as the semiconductor industry continues to expand locally, more jobs are likely to be available. While this suggests opportunity for Arizona’s economy, are there enough skilled workers able to meet the growing demand?
With Growth Comes Opportunity
The semiconductor industry has demonstrated impressive growth. This has been further aided by the CHIPS and Science Act of 2022, which is contributing to a resurgence in domestic chip manufacturing, along with greater research and development. The Act is a federal statute that provides approximately $280 billion in funding to the further research and manufacturing of semiconductors in the U.S.
Yet, employment in the semiconductor industry makes up a relatively small percentage of overall employment in Arizona. Only the three chip makers referenced above are on the latest list of the 100 largest non-governmental employers in Arizona, as compiled by The Arizona Republic. The article points out that Intel remains the largest chip employer with roughly 13,000 jobs statewide, followed by Microchip Technology with nearly 2,400 jobs, and Taiwan Semiconductor with approximately 2,000 employees. Combined, this represents about 2.9% of the more than 608,000 people working for Arizona’s 100 largest employers.
Hopefully, employment will grow along with the semiconductor industry locally. For example, Intel is seeking a $20 billion expansion of its Chandler, Arizona campus—a development that reportedly could add 3,000 jobs, plus an estimated 15,000 among local suppliers. Taiwan Semiconductor is investing $40 billion at two new factories in North Phoenix and expects to have 4,500 people working there by 2026. And more suppliers are emerging in Arizona to serve these and other companies, including ON Semiconductor Corporation (also known as onsemi), which manufactures outside of Arizona but provides about 700 jobs at its Scottsdale headquarters.
Potential Drivers and Detractors
In addition to the CHIPS and Science Act mentioned earlier, there are a number of key industry trends that continue to drive growth in the rapidly-evolving semiconductor market. Semiconductor chips are critical components across a wide range of technology-based products and services.
The subject of water and a concern for lack of availability in Arizona is often cited as a potential detractor from economic expansion. However, the article suggests that water is not generally viewed as an issue for semiconductor companies. As reported, chip makers, including Intel and Taiwan Semiconductor Manufacturing, are reusing the majority of their water.
Tony Tanner, CFA®, Lead Portfolio Manager of Aquila Tax-Free Trust of Arizona, was referenced and agrees with this assessment, stating that he believes Arizona has done a good job of managing water. Just as critical—and less appreciated, in his view—is what he called the relatively good reliability of the electric grid. Mr. Tanner noted that it is critical for companies to not have shutdowns when they are involved in precision manufacturing, as is the case with semiconductors.
Moving Forward
As the semiconductor industry in Arizona expands and adapts further, so too should its demand for workers with specialized skills—as should the need for adequate training and education. Meeting the demand could likely require a variety of programs and initiatives from companies, colleges and universities, government entities, among others.
Aquila Investment Management’s Tony Tanner expects a “smart manufacturing” trend focused around semiconductors to continue in Arizona, particularly in the metro Phoenix area. He cites several industry drivers, including more large companies and their decision-makers locating there, the contribution of Arizona State University as an innovation hub, and overall improvements in training and educational programs.
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