Arizona vies for slice of $52B fund for chips industry
WASHINGTON — In recent weeks, Gina Raimondo, the commerce secretary, has talked with Sen. Mark Kelly of Arizona, spent time with the president of Arizona State University and appeared at a conference with the mayor of Phoenix.
Their discussions centered on one main topic: chips.
Raimondo is in charge of handing out $52 billion for semiconductor manufacturing and research under the CHIPS Act, a funding package intended to expand domestic production of the foundational technology, which acts as the brains of computers. The legislation, which passed in August, is a prime piece of President Joe Biden’s industrial policy and part of a push to ensure America’s economic and technology leadership over China.
Arizona wants to make sure it is in position for a portion of that once-in-ageneration gusher of federal funding, for which the Commerce Department is expected to begin taking applications within days. As a result, Arizona officials have inundated Raimondo to promote the state’s growing chip industry and talked with the CEOs of giant chip companies such as Intel and Taiwan Semiconductor Manufacturing Co.
Arizona, which is vying for subsidies along with Texas, New York and Ohio, may have a head start on the action. The state has been home to semiconductor makers since the 1940s and has 115 chip-related companies, whereas there is one major manufacturer in Ohio.
Led the nation
Arizona also has led the nation in chip investments since 2020, with the announcements of two new chipmaking plants by TSMC and two additional factories from Intel that will cost a combined $60 billion. State leaders had helped persuade the companies to open the facilities by offering big tax breaks and water and other infrastructure grants. They also promised to expand technical and engineering education in the state.
State officials and chip companies also acted as a lobbying bloc in Washington. They helped shape the CHIPS Act to include federal tax credits, subsidies, and research and workforce grants.
TSMC expanded its lobbying staff to 19 people from two in two years, and Intel spent more than $7 million in lobbying efforts last year, the most it had spent in two decades. Arizona State University spent $502,000 on lobbying last year, also the most in two decades.
“It has been an intentional and an all-hands-ondeck effort,” said Sandra Watson, president of the Arizona Commerce Authority, a nonprofit economic development organization that has helped lead state efforts to attract chip companies and push for the CHIPS Act.
The Commerce Department is expected to soon begin handing out $39 billion in subsidies to semiconductor makers, later opening the process to companies, universities and others to apply for $13.2 billion in research and workforce development subsidies. The CHIPS Act also provides an investment tax credit for up to 25% of a manufacturer’s capital expenditure costs.
The ‘race’ is on
Raimondo has described the process as a “race” among states. “Every governor, every state legislature, every president of public universities in every state ought to be now putting their plan of attack together,” she said in August during a visit to Arizona State University’s tech research and development center. “This is going to be a competitive process.”
The Commerce Department declined to comment.
Arizona’s history with chip manufacturing stretches back to 1949, when the telecom hardware and services provider Motorola opened a lab in Phoenix that later developed transistors. In 1980, Intel built a semiconductor plant in Chandler, a suburb southeast of Phoenix, drawn by the state’s low property taxes, relative proximity to its Silicon Valley headquarters and stable geology. (Earthquakes are rare in Arizona.)
During President Donald Trump’s administration, he pushed an “America First” policy agenda. That opened an opportunity for Doug Ducey, a Republican who was then Arizona’s governor, and other state officials to transform their economy into a tech hub.
In 2017, Ducey and other Arizona officials traveled to Taiwan to meet with executives of TSMC, the world’s biggest maker of leading-edge chips.
They promoted the state’s low taxes, its business-friendly regulatory environment and Arizona State University’s engineering school of more than 30,000 students.
Ducey, who was close to Trump, also had calls with Commerce Secretary Wilbur Ross, Defense Secretary Mark Esper and Secretary of State Mike Pompeo on financial incentives to expand domestic production of chips.
“My job is to sell Arizona,” Ducey said. “In this case, it was to sell Arizona to TSMC but also to the administration.”