Why Intel and TSMC are building water-dependent chip factories in Arizona

Electric vehicle driving through the Arizona desert

The world’s largest semiconductor manufacturers are quickly trying to build new factories as the global chip crisis continues to wreak havoc on a plethora of industries.

US semiconductor giant Intel in March announced plans to spend $ 20 billion on two new chip factories in Arizona. Separately, Taiwan Semiconductor Manufacturing Company (TSMC) said it will build a $ 12 billion plant in Arizona, and general manager CC Wei said on Wednesday that construction had already started.

Grand Canyon State may not seem like the most obvious place for a chip “foundry” or “factory”, however, as high-tech manufacturing plants gobble up millions of gallons of water every day.

Currently, in the face of climate change, Arizona faces a worsening water crisis and some of the state’s most important aquifers have uncertain futures.

Arizona received just 13.6 inches of precipitation on average per year between 1970 and 2000, according to the NOAA National Climate Data Center, making it the fourth driest state in the country. Conversely, Hawaii and Louisiana recorded the highest levels of average annual precipitation in the United States during the same period, with 63.7 inches and 60.1 inches, respectively.

“Water is a key element in semi-manufacturing, but the infrastructure has been put in place [in Arizona] to ensure adequate supply to meet current industry needs, “Alan Priestley, vice president analyst at technology research firm Gartner, told CNBC.

A key consideration of any new construction would most likely be to help improve water supply infrastructure, he added.

Glenn O’Donnell, vice president and research director at analyst firm Forrester, told CNBC that chipmaking factories “recycle water religiously,” adding that it is a bit like a swimming pool in a closed building.

“You need a lot to fill it up, but you don’t need to add too much to keep it going,” he said. “Also, being in an enclosed space, much of the water that evaporates can be captured with a dehumidifier and returned to the pool. Factories will do similar things with their own water consumption.”

Intelligence notes on his site that it strives to achieve “net and positive water use” in Arizona; and that it has funded 15 water restoration projects that aim to benefit the state. “When fully implemented, these projects will restore approximately 937 million gallons each year,” the company said.

Beyond the water

TSMC and Intel, two of the chip industry’s biggest heavyweights, have chosen to expand in Arizona for several other reasons, analysts say.

Intel has been in Arizona for over 40 years, and the state is home to a well-established semiconductor ecosystem. Other major chip companies in Arizona include On Semiconductor, NXP, and Microchip.

Intel now employs more than 12,000 people in Arizona, and the state is home to Intel’s newest manufacturing facility, Fab 42.

As Intel increased its presence in Arizona, local universities have “established a solid reputation for semiconductor design courses and research providing a highly skilled workforce for the local semi-industry.” Priestley said. “This has helped create an ecosystem of businesses to provide the products and services needed to manufacture chips.”

TSMC will be “able to exploit these resources and [the] supply chain supplier ecosystem, ”Priestley said.

Tax breaks and local incentives “will have played a big role” in the initial selection of the site, he continued, noting that land availability, land costs, housing costs and the local economy will have. also been taken into account.

Seismically stable

The Arizona case does not end there. Its seismic stability and the relatively low risk of other natural interference are attractive to chipmakers, O’Donnell said.

“A chip factory cannot shake, not even a microscopic amount,” he said, adding that they set up such factories in the bedrock to keep them stationary. “Even a 0.5 Richter shake can ruin an entire crop of crisps.”

That said, Intel has a few chip factories on the west coast of the United States, where the ground is more susceptible to earthquakes. For example, the company has a strong presence in Hillsboro, Oregon.

“The west coast has factories, but they have to take big steps to isolate the tremors,” O’Donnell said. “They don’t need such drastic measures in Arizona because it shakes a lot less.”

Arizona is also immune to most other natural disasters like hurricanes and wildfires, O’Donnell said.

Along with its abundant sunshine, Arizona also has “reliable, abundant, and green electrical power,” O’Donnell said, calling the Salt River project a local electrical utility in the Phoenix area that caters to to large consumers of electricity. A chip smelter needs electricity on the scale of a steel plant, according to O’Donnell.

In the end, a lot of it comes down to politics.

“Arizona’s political apparatus is determined to make affairs of state favorable,” O’Donnell said. “More business equals more jobs and better jobs equals more votes for power brokers. Recent announcements from Intel and TSMC come from significant support from federal, state and local government entities. “

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