Phoenix, Second Silicon Valley, China?

[Arthur Hanson]

With land, housing prices and looser regulations will Phoenix become the center of chip fabrication for the US. With TSM taking the lead and Intel following with many suppliers setting up shop to support the coming fabs, will Arizona become a second tech hub. Is there the educational support of sufficient size to create a new tech hub? Has the work from anywhere covid driven changes dramatically changed the location game? Also, will the Ukraine crisis force China to choose sides impact the future direction of the semi industry, especially with China thinking about invading Taiwan. On this issue I feel China trying to take over Taiwan would dwarf the Ukraine crisis because of the firm allies and agreements Taiwan now has with major powers, including the US by law. Any thoughts or comments appreciated on these issues.

 

[jms_embedded]

With land, housing prices and looser regulations will Phoenix become the center of chip fabrication for the US. With TSM taking the lead and Intel following with many suppliers setting up shop to support the coming fabs, will Arizona become a second tech hub. Is there the educational support of sufficient size to create a new tech hub?

That's a bit overdramatic. The Phoenix area has been a home for semiconductor manufacturing since Motorola opened a research lab in 1949. (Not sure if that started in transistor production but I have read an article somewhere that Motorola was definitely in transistor production in Phoenix by the mid-1950s.) The area has grown gradually over the years, and is now home to NXP (former Motorola), Intel, Microchip, ON Semi (former Motorola), and a few others of various sizes. (Linear Technology has some kind of facility here)

I work for Microchip in Chandler (disclaimer: this post is my own and not representative of my employer) and when I commute to work I drive by a little sign on Frye Rd that says something like WARNING GAS PIPELINE but in small print it says that it is a nitrogen pipeline. There are two pipelines from the nearby Air Products facility; my guess is that the one on Frye Rd goes to the NXP plant and probably the other one goes to Intel's Ocotillo complex to the south. Not sure what other supporting businesses are around, but they're there.

Land and housing prices are no longer cheap here. I don't know where you get "looser regulations" from. My understanding is that AZ has maintained its role in semiconductor fabrication due to tax incentives, network effects (we already have a semiconductor manufacturing ecosystem), nearby connections to Arizona State University in Tempe, nice weather during the cooler months, and geological stability.

Water is carefully managed in Arizona by necessity. There was a good newspaper piece on fab water use recently that talks about TSMC and Intel's water use. There's room for some additional fab expansion here by displacing other usages of Colorado River water and Roosevelt Dam reservoir water -- the local Native American reservations have a fairly large allocation, and there are agricultural users around farming cotton and alfalfa and citrus; I suspect they will sell part/all of their allocation when it is profitable to do so -- but not an infinite supply. My personal guess is that you won't see any more than 1.5 - 2.0x the fab capacity of what is there today + the projected Intel buildout (fab 42 existing + 52, 62 under construction) and full buildout of TSMC in North Phoenix. Too much strain on water or land/staff* availability at that point.

*edit on staff availability: although personal income tax rates in AZ are lower than in CA, the year-round weather isn't as nice as Silicon Valley. Arizona school systems are poorly funded and rate poorly nationwide. Harder to recruit people to the Sonoran Desert where it gets to 120 F in summer, when the housing prices aren't affordable and school systems aren't competitive. (Chandler has low property taxes though, due to all the industry located here. I pay less than 20% of what some of my relatives pay for property tax in NJ and I have a larger house than they do. But that's partially why we have low property taxes... you reap what you sow.)

*edit 2: Found the Solid State Technology article again:

The sunny desert sands of Arizona have attracted silicon-based industries since the inception of the transistor. In 1949, Motorola set up a small, solid state research laboratory in Phoenix to investigate the new field of solid state technology. By 1952, its semiconductor development group began to manufacture a three-amp power transistor. Motorola's first mass-produced semiconductor and the world's first high-power transistor, a germanium device intended for car radios, was commercially produced in 1955. In 1956, Motorola became a commercial producer and supplier of semiconductors for sale to other manufacturers.

 

[tonyget]

I feel China trying to take over Taiwan would dwarf the Ukraine crisis

So life in Taiwan are more important than Ukrainians？Such disrespect

 

[tooLongInEDA]

So life in Taiwan are more important than Ukrainians？Such disrespect

That was not his point at all. He's talking about the economic impact and not the human one. I found that quite clear. In fact, I don't think I've ever read anything from Arthur Hanson which is remotely offensive or lacking in humanity. Just my view.

 

[Arthur Hanson]

So life in Taiwan are more important than Ukrainians？Such disrespect

All life is important. I believe in cooperation and collaboration on everything from a personal level to a world wide level. I have very personal experience in this area with two life and death assaults, one at age ten and another at age 14. Violence is the last refuge of the incompetent. The destruction of Ukraine can only be considered a war crime with the deliberate targeting of civilians. I have written several times on collaboration and cooperation over conflict. As an investor it is obvious collaboration and cooperation is far more profitable and fulfilling than conflict.

 

[Paul2]

That was not his point at all. He's talking about the economic impact and not the human one. I found that quite clear. In fact, I don't think I've ever read anything from Arthur Hanson which is remotely offensive or lacking in humanity. Just my view.

The war of 2022 has already wrecked EU's economy more than anybody could have imagined. It's not WW2 level yet, but more than at any time in post war history.

It's not only Russian market evaporating literally overnight, it's Ukraine plus Russia, and plus Belarus, and plus all remaining CIS countries, and plus every other Russia dominated country going dark. It's a double digit of world economy.

More economic carnage is yet to come. China will be a big one. A double digit percentage of NASDAQ will vanish.

Any action in South Sea will impact not only Taiwan, but Korea, Japan, and not to say Chinese dependants, and smaller South-East Asian economies dependent of Japan, Taiwan, and Korea (Malaysia, Indonesia, Philippines, Thailand)


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People who were thinking that global trade, and economics integration made wars in between major economies unthinkable, because they will be as damaging economically as a thermonuclear war only proved the later.

The "economic nuclear bomb" is an asymmetric weapon. Rouge regimes know that the West will never use it first, so they act with ease of mind — they can always scale back every time it gets too tough on bank account.

 

[Portland]

The war of 2022 has already wrecked EU's economy more than anybody could have imagined. It's not WW2 level yet, but more than at any time in post war history.

It's not only Russian market evaporating literally overnight, it's Ukraine plus Russia, and plus Belarus, and plus all remaining CIS countries, and plus every other Russia dominated country going dark. It's a double digit of world economy.

More economic carnage is yet to come. China will be a big one. A double digit percentage of NASDAQ will vanish.

Any action in South Sea will impact not only Taiwan, but Korea, Japan, and not to say Chinese dependants, and smaller South-East Asian economies dependent of Japan, Taiwan, and Korea (Malaysia, Indonesia, Philippines, Thailand)


--------------------------------


People who were thinking that global trade, and economics integration made wars in between major economies unthinkable, because they will be as damaging economically as a thermonuclear war only proved the later.

The "economic nuclear bomb" is an asymmetric weapon. Rouge regimes know that the West will never use it first, so they act with ease of mind — they can always scale back every time it gets too tough on bank account.

So you're saying I should stay at my job?

 

[Paul2]

So you're saying I should stay at my job?

Are you thinking of switching workplaces? From where to where?

 

[George Storm]

So life in Taiwan are more important than Ukrainians？Such disrespect

I think he is simply reporting political reality - except that I fear he may overstating the realities of any legal agreements with the US
Sept 1938: Hitler claims Sudetanland: no treaties - ceded "in the name of pease"
March 1939: Hilter broke a pact not to invade Bohemia (effectively ceded by czech president Hacha, because of absence of treaties - no action
Sept 1939: Hitler invades Poland: treaty + one year extra preparation - UK, then France declare war
Feb 2022: Putin invades Ukraine: no treaties, no agreements, minimal Western troops locally - arms supplied to Ukraine, but no more. My fear is that this will be seen as fundamental weakness
Future Possibilities (hope not):
Russia invades Azerbaijan or Finland ???
China invades Taiwan ???
Russia invades Poland = war with Nato

 

[tooLongInEDA]

I think he is simply reporting political reality - except that I fear he may overstating the realities of any legal agreements with the US
Sept 1938: Hitler claims Sudetanland: no treaties - ceded "in the name of pease"
March 1939: Hilter broke a pact not to invade Bohemia (effectively ceded by czech president Hacha, because of absence of treaties - no action
Sept 1939: Hitler invades Poland: treaty + one year extra preparation - UK, then France declare war
Feb 2022: Putin invades Ukraine: no treaties, no agreements, minimal Western troops locally - arms supplied to Ukraine, but no more. My fear is that this will be seen as fundamental weakness
Future Possibilities (hope not):
Russia invades Azerbaijan or Finland ???
China invades Taiwan ???
Russia invades Poland = war with Nato

Perhaps this is not the forum to start debating Ukraine ... however, in the interest of some balance, I strongly suspect the US is supplying very good intelligence as well as arms. In addition to training for the Ukrainian military over the past few years. I very much doubt the Ukrainians could have resisted so effectively without this. It's also worth stopping and thinking about this - if the Ukrainians plus only unofficial western support can stop the Russian military, how far would you back an unproven Chinese military (with unproven kit) versus Taiwan ?

China is getting exactly what it wants from the Ukraine conflict - a weak and dependent Russia and near--exclusive access to cheap raw materials. Without firing a shot.

In any case, they've got some really serious domestic problems to worry about (housing financial bubble bursting).

I think this whole "western weakness" argument is hugely exaggerated. The US military is still the only one that can deploy with both quantity and quality (reliable kit, disciplined and well-trained soldiers) anywhere in the world.

I assume most posters on here are from the US. Why are you constantly beating yourselves up ? This isn't the brash, over-confident US we remember (and liked to dislike) from the 1980s !

 

[George Storm]

Perhaps this is not the forum to start debating Ukraine ... however, in the interest of some balance, I strongly suspect the US is supplying very good intelligence as well as arms. In addition to training for the Ukrainian military over the past few years. I very much doubt the Ukrainians could have resisted so effectively without this. It's also worth stopping and thinking about this - if the Ukrainians plus only unofficial western support can stop the Russian military, how far would you back an unproven Chinese military (with unproven kit) versus Taiwan ?

China is getting exactly what it wants from the Ukraine conflict - a weak and dependent Russia and near--exclusive access to cheap raw materials. Without firing a shot.

In any case, they've got some really serious domestic problems to worry about (housing financial bubble bursting).

I think this whole "western weakness" argument is hugely exaggerated. The US military is still the only one that can deploy with both quantity and quality (reliable kit, disciplined and well-trained soldiers) anywhere in the world.

I assume most posters on here are from the US. Why are you constantly beating yourselves up ? This isn't the brash, over-confident US we remember (and liked to dislike) from the 1980s !

Perhaps not indeed - except for direct semiconductor impications.
Ukraine as such has minimal direct impact - though the ramifications will have substantial impact.
The ramifications increase as we go down my list - unless/until those above Poland involve Nato in a war.

I'm not overly optimisitc - on the basis that Putin could maintain his position for another 20 years - and he appears to have an agenda.
And it seems clear that there are those in China's elite who place the "historic links with Taiwan*" as more important than economic benefits.

*Interpret as coming from an Englishman, for anyone who hasn't already done so

 

[hist78]

I think he is simply reporting political reality - except that I fear he may overstating the realities of any legal agreements with the US
Sept 1938: Hitler claims Sudetanland: no treaties - ceded "in the name of pease"
March 1939: Hilter broke a pact not to invade Bohemia (effectively ceded by czech president Hacha, because of absence of treaties - no action
Sept 1939: Hitler invades Poland: treaty + one year extra preparation - UK, then France declare war
Feb 2022: Putin invades Ukraine: no treaties, no agreements, minimal Western troops locally - arms supplied to Ukraine, but no more. My fear is that this will be seen as fundamental weakness
Future Possibilities (hope not):
Russia invades Azerbaijan or Finland ???
China invades Taiwan ???
Russia invades Poland = war with Nato

The legal foundation of US-Taiwan relationship is based on a US domestic law called Taiwan Relations Act (TRA) enacted April 10, 1979. This is a strange arrangement forced by US Congress on President Jimmy Carter. Carter did not prepare anything (or lacking any vision) about how to handle US/Taiwan relationship after switching diplomatic recognition from ROC (Taiwan) to PRC (mainland China).

TRA covers area of culture, economic, security, political, and military/weapon sales and cooperations. Some people say this is the only US domestic law governs an extensive international relationship between US and a foreign country (foreign government, authority, or entity).

More than 43 years after the pass of TRA, I'm amazed by those senators and congressmen's foresight and visions.

 

[Portland]

Before the Ukraine invasion there was no deterrence to invade Taiwan but now there is. Anti-tank weapons performed beyond conventional thinking in stopping Russian armour and semiconductors is one of the reasons. Ukraine did a great job getting it's civilian population to the battlefield. Taiwan would be even more difficult because it's an island and armour would have a disadvantage, it's a leader of semiconductors, they have the people, taiwan has some air defenses, and China doesn't want to pay the economic price of becoming the pariah of the world.

 

[jms_embedded]

Oh boy, more electronics manufacturing plants in the Phoenix area, this time in the East Valley. Too much of a good thing?

https://www.bizjournals.com/phoenix/news/2022/03/21/korean-electronics-giant-lg-queen-creek-plant.html

South Korea-based electronics giant LG is planning a $2.8 billion plant in Queen Creek, which town documents say will create 2,800 jobs and include 1 million square feet of new development.

Queen Creek Town Council voted at its March 16 meeting on a development agreement and foreign trade zone recommendation for ES America LLC for 300 acres of land that are part of a larger, 650-acre parcel that will be sold at an Arizona State Land Department auction on April 19. The items were approved 5-2 without discussion from the Council. Councilmembers Leah Martineau and Emilena Turley voted against approval.


City documents show that the company chose Queen Creek after a “national search involving multiple states and regions.”

According to the Arizona Corporation Commission, LG Energy Solution Ltd. is principal of ES America.

City documents do not specify the exact use for the plant, simply calling it an “advanced manufacturing facility.” City documents refer to the LG plant as “Project Alpha.” LG Energy Solution and electric truck manufacturer Nikola Corp. announced in October 2021 that they had entered into a battery supply agreement. That agreement would supply Nikola trucks with LG batteries from 2022 to 2029.

When reached by the Business Journal, a representative from LG declined to comment.

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