Taiwan and Arizona economic groups agree to bring more chip industry to desert state

Never mind that semiconductor foundries require lots of water and that Arizona is a desert state

The US city of Phoenix, Arizona is getting more semiconductor factories – if all goes according to the plan lined up yesterday by Taiwan economic development officials and an Arizona economic group.

A Memorandum of Understanding (MOU) between the Taiwan-USA Industrial Cooperation Promotion Office (TUSA) and the Greater Phoenix Economic Council (GPEC) establishes a cooperation platform and plans for next-gen microelectronic product development and manufacturing. It will also match up strategic partners and court related industries to join in on the semiconductor fun and games.

TUSA is supported by Taiwan's Ministry of Economic Affairs.

GPEC tweeted:

Arizona's groundbreaking partnership with Taiwan will bring opportunity and economic success to both regions, and help shape the future industrial landscape. #GreaterPHXtogether #AZFreeToBe https://t.co/1BacXFK5Ma

— Greater Phoenix Economic Council (@GPEC) August 24, 2021

"Signing of the MOU encourages both sides to move toward a tighter bilateral industrial cooperation, particularly on the heels of Taiwan Semiconductor Manufacturing Company's plan to build a $12 billion fab in Arizona," said Chih-Ching Yang, deputy director general of the Industrial Development Bureau (IDB), who witnessed the signing.

GPEC chief exec Chris Camacho told Reuters his org would co-locate as many TSMC suppliers and other related companies to the area as possible, and 40 companies are already considering investing in Arizona.

"We're unapologetically pursuing becoming the top global destination for semiconductors and the semiconductor supply chain," Camacho told Reuters.

In July, semiconductor powerhouse Taiwan Semiconductor Manufacturing Co (TSMC) revealed staff from the USA trained on five-nanometer tech in Taiwan as preparation for Arizona facilities slated to start producing in 2024. The announcement came with a warning that producing in Arizona is a wee bit more expensive than Taiwan, and customers may see resulting price hikes.

Arizona is currently a - pardon the pun - hot destination for chipmakers, as Intel recently committed US$20 billion to build its Intel Foundry business in the state.

The world is in the midst of a semiconductor shortage, brought on by an increasing demand for tech and exacerbated by COVID-19. The demand for chips shows no signs of stopping soon, with World Semiconductor Trade Statistics (WSTS) predicting an increase in the worldwide semiconductor market from US$440 billion to US$589 billion by 2025.

Earlier this week, Samsung referred to its aggressive semiconductor investment as a "survival strategy," highlighting how important it is for companies to keep competitive in the market or risk losing foothold.

The elephant in the room for investors is that Arizona has a desert climate and semiconductor factories require a lot of water. In February, TSMC trucked water in to its Taiwan fabrication plants as the country went through a drought.

On August 16, US officials declared a water shortage for the Colorado River, which runs along the western Arizona border before cutting across the Northwest corner of the state as it hits Lake Mead, the largest reservoir in the US and a major source of Arizona's water supply.

The Verge reported last week that as a result of the drought, California, Nevada, Arizona and Mexico will experience mandatory water cuts starting in January 2022. Although fabs generally recycle their water, the two to four million gallons (7.5–15 million litres) of water typically used at a semiconductor factory in a day equates to daily usage for between 13,600 and 27,400 Arizona residents. ®