This was by far the biggest economic security crisis of the pandemic: Supply chain disruptions that have hit the industrialized world have highlighted just how dependent the global economy is on a handful of manufacturers microchips in East Asia.
Growing demand as housebound workers upgraded electronics and transit-averse commuters ordered new cars was causing shortages and bottlenecks — and sparking anxieties at the Pentagon and other security agencies. national security, whose high-tech weapons required chips made near the shores of the West’s emerging geostrategic rival, China.
No company was more at the center of these fears than Taiwan Semiconductor Manufacturing Company, which not only produces nearly 90% of the chips made using the most advanced technologies, but also has most of its production on an island. origin who became increasingly bellicose targets. Chinese threats.
As the White House and the U.S. Congress place domestic microchip production at the center of their economic policy, TSMC’s decision in May 2020 to build a new $12 billion manufacturing facility in Phoenix has emerged as foreign investment the most watched in the United States in decades.
Phoenix’s ability to secure the plant, which debuted in its booming northern suburbs last year, relied in part on favorable business taxes, a skilled workforce and existing support programs. for foreign companies – all qualities that helped put the Arizona capital in the top 20 of the FT-Nikkei Investing in America ranking.
But Phoenix has also benefited from its history as home to many US domestic chipmakers, which have long been overtaken by Taiwanese and South Korean rivals. The city has also relied on decades-long ties with Taipei, which has been a “sister city” of Phoenix since 1979.
“Phoenix has always had a very strong relationship with Taiwan,” says Christine Mackay, the city’s director of community and economic development. Mackay and Kate Gallego, Democratic Mayor of Phoenix, met with TSMC executives during a trip to Taiwan in early 2019 to celebrate 40 years of relationship with the Sister Cities.
“When we talk to companies like TSMC, they say they really felt that we valued what they were doing and knew they would be a priority for us,” Gallego says.
TSMC says it began seriously evaluating U.S. sites in 2019 after company president Mark Liu attended a conference in Washington, D.C., for foreign investors sponsored by SelectUSA, the U.S. Department of Commerce’s program to attract investors. foreign capital.
Rick Cassidy, managing director of TSMC Arizona, said the company is looking for many of the same qualities that other investors, foreign and domestic, are looking for: low costs, a talented workforce and a reliable supply chain.
“In terms of cost savings, we considered the cost difference between the United States and Taiwan – how we could level the playing field between the potential investment site and the sites where we already operate,” says Cassidy.
But he adds that because of the chip industry’s large and complex network of suppliers, TSMC leaned towards sites with a history in the semiconductor industry.
Phoenix emerged as an obvious choice, with the city tracing its semiconductor heritage back to Motorola’s first factory in 1949. Thirty years later, Intel began operating in nearby Chandler, and Arizona State University continues to produce semiconductor specialists even though the United States offshored most of its production in the 1990s.
“There have been many in-depth conversations with TSMC: how do we network in your programs? How do we educate your students? says Kyle Squires, Dean of ASU’s Ira A. Fulton Schools of Engineering. Schools began meeting with TSMC in mid-2019 to discuss recruitment.
Politics also played a role, according to Dick Thurston, a former senior vice president and general counsel at TSMC, who worked with several government agencies keen to lure the chipmaker to the United States.
Thurston said aides to then-President Donald Trump were eager to direct foreign investment to so-called swing states, where polls showed the incumbent president was in an uphill battle for re-election. Along with traditional northern battleground states like Pennsylvania and Wisconsin, Arizona had become key to Trump’s campaign efforts.
“When Mark Liu was visiting DC in 2019, the White House was suggesting Arizona,” Thurston said, adding that among those delivering the message were Mike Pompeo, the secretary of state, and Wilbur Ross, the secretary at the trade.
Although Texas was also one of Trump’s targets, two people familiar with TSMC’s decision say he walked away from the state because rival Samsung had already invested there and would continue to build its own. state-of-the-art factory in the small town of Taylor.
City and state leaders have made courting TSMC a priority. Besides Gallego and Mackay, the November 2019 delegation to Taipei included leaders from universities like ASU, local utilities and Arizona-based engineers.
The coordinated campaign has drawn attention in Taiwan. “There’s also a lot of investment in Texas from the semiconductor industry. [But] being such a big state, they have a more decentralized way of going about it, of attracting investment, and that actually creates a bit of confusion,” says an official from the American Institute in Taiwan, the quasi-embassy of the US government in Taipei. .
“I’ll give Arizona a compliment: the state corporation [economic development agency] and the one in Phoenix, which is quasi-public-private, have a great working relationship,” the official adds.
The state and city have also pledged to continue supporting the business once it kicks off in Phoenix, providing expatriate employees with Mandarin-language resources and connecting their families to local school districts, Mackay said.
“Right from the start of our selection process, they were very supportive and excited about our anticipated growth,” Cassidy says. “They have always been very proactive in answering our questions and giving us resources.”
Mackay says at least 40 vendors have come to the Phoenix area since TSMC’s announcement. In June, the Bank of Taiwan announced that it would open an office in the city to serve Taiwanese businesses.
“The story is just beginning,” says Grace O’Sullivan, ASU vice president and TSMC point of contact at the university, adding that the real work will be in building a lasting partnership with the company.