The past few years have been a roller-coaster ride for the semiconductor and electronics industry, particularly in the United States — coming out of a slowdown into a pandemic that created shortages, to a boom year that has the industry talking about reaching a trillion dollars in semiconductor sales, into a downturn that the industry is slowly pulling out of in the last two quarters of 2023. One of the critical issues the pandemic highlighted was a weakness in the U.S. semiconductor supply chain and a loss of semiconductor manufacturing expertise. Over the past four years, Arizona and the Phoenix area have been at the epicenter of rebuilding the semiconductor supply chain.
Arizona has a long history of microelectronics and semiconductor activity. However, it had been a while since a new fab started. Intel’s fab 42 was operational in 2011 and mothballed, then restarted in 2020 on 10nm technology. The restart of fab 42 and the need to improve the U.S. semiconductor supply chain got the ball rolling with the new fab activity.
Before Intel had fab 42 up and fully operating, the new fab fireworks had started. Taiwan Semiconductor Manufacturing Company announced its intentions of building a fab in the Phoenix area in May of 2020 and, at the groundbreaking in December of 2022, announced a second fab and an investment increase from $12 to $40 billion. Intel announced in March of 2021 that it would build fabs 52 and 62 at its Ocotillo site. Combined with Intel’s investment of $30 billion for its new fabs, Phoenix has $70 billion in new fab investment between 2021 and 2026. While there was a learning curve on both TSMC’s side and for the local contractors and unions who were building the fabs, TSMC’s third quarter 2023 earnings call and an ABC news report indicate that relationships and construction are back on track, with the first fab scheduled for production sometime in the first half of 2025.
Four new fabs will require additional investment by TSMC and Intel suppliers. Chris Camacho, president and CEO of the Greater Phoenix Economic Council, says, “So far, 22 companies have announced plans to expand to Arizona because of TSMC. Those 22 companies represent about $1 billion in capital investment, including buying or building facilities and equipment investments, representing about 1,000 additional jobs.” This does not include the commitment Intel’s suppliers need to support two new fabs. So, there is an upside to that $1 billion number. Suppliers will need to expand service and sales operations; some suppliers, such as Yield Engineering Systems and EMD, have recently expanded manufacturing capabilities and added application lab services.
All four fabs are targeted at the foundry business; however, it’s also possible that Intel’s fabs could also be tasked with manufacturing Intel’s chips as well. TSMC’s fabs are scheduled to start up at 4nm and 3nm technology nodes. Intel will start at its 20A and 18A technology nodes (20A is approximately equivalent to a 2nm technology node). TSMC will likely use finFET technology for its first-generation 3nm. Over time, the gate-all-around (GAA) process will likely transition to the Phoenix facilities. Intel’s 2nm will start with its version of GAA, which Intel refers to as Ribbon FET. Intel expects to begin production in 2024 and then be the most advanced semiconductor manufacturer on U.S. soil and, potentially, in the world.
As the construction challenges of 2023 have been put behind TSMC and Intel and equipment starts to move into the fabs, there is still a significant amount of growth that will take place in the Phoenix area to support the electronics industry. As mentioned above, TSMC and Intel suppliers must expand operations to support advanced chip production effectively. Arizona State University and other educational institutions will be instrumental in educating and training the personnel needed for fab operation and helping to develop new manufacturing technology. This year is expected to usher in significant growth in data centers focused on AI, and these companies are looking for foundries that can manufacture the silicon designed for AI applications. The new infrastructure being built in Arizona will be vital in driving growth in 2024 and beyond.
Dean Freeman is a senior advisor and analyst at Kiterocket Insights. Freeman has more than 40 years of experience in the semiconductor industry and is one of the unique individuals who has not only worked both in a fab and for semiconductor equipment manufacturers, but he has also had responsibility for every aspect of the semiconductor manufacturing process, from wafer selection to final passivation.
Before working with Kiterocket Insights, Freeman was a VP of research at Gartner, where he was the primary researcher for semiconductor technology, looking at the impact of Moore’s Law on developing new semiconductor equipment and processes. He frequently advises on best use of technology transitions to leverage new product introductions. Before Gartner, Freeman held senior marketing and technology development positions at FSI, Watkins Johnson, Lam Research and Texas Instruments.
