Arizona’s Blueprint for a New Age of American Manufacturing

Semiconductors—also called “microchips” or simply “chips”—are the fundamental ingredients to all modern digital and electronic devices, from smartphones, laptops, and advanced artificial intelligence to motor vehicles, medical devices, and even defense tech.

Although the semiconductor business was born in America’s Silicon Valley half a century ago, the manufacturing of semiconductors was gradually offshored, and our domestic capacity has significantly diminished.

For both national security and economic competitiveness, it has been a bipartisan priority spanning multiple presidential administrations to reinvigorate American semiconductor manufacturing. Fortunately, Arizona has taken on the challenge, becoming a burgeoning semiconductor manufacturing hub in the United States and successfully attracting global companies such as Taiwan Semiconductor Manufacturing Company (TSMC), Intel, and ASM International to build new fabs stateside.

Arizona’s inherent appeal to manufacturers rests on several fundamental advantages and deliberate state policy choices, as documented in the 18^th edition of Rich States, Poor States: ALEC-Laffer Economic Competitiveness Index, where Arizona ranked second in the nation for economic performance and sixth in the nation for economic outlook.

Arizona has cultivated a positive economic environment that welcomes new semiconductor manufacturing by cutting overly burdensome regulations, enticing entrepreneurs and innovators with competitive tax policy, and investing in a robust education and talent pipeline to staff the jobs of tomorrow and retain high-skilled American workers.

Arizona’s infrastructure capacity to support resource-intensive industries like semiconductor manufacturing should not be discounted. Similar to the data centers that enable the modern internet and artificial intelligence software, semiconductor fabs require dependable, uninterrupted sources of baseload electricity to stay operational.

When it comes to energy stability, Arizona has excelled. U.S. News & World Report found that Arizona ranks eighth in the nation for electric grid reliability, and the state only faced six major extreme weather outages (affecting at least 50,000 residents or interrupting more than 300 MW) over two decades, despite relentless exposure to extreme triple-digit heatwaves. Meanwhile, nearby Southwestern state California suffered 145 outages over the same period.

ALEC’s Energy Affordability Report: 4^th Edition found Arizona’s position on energy affordability to be middle of the road, benefitting from a diverse generation mix of natural gas, nuclear, coal, and solar to meet the needs of businesses and residents. Although legislators have adopted some problematic energy policies in the past, Arizona regulators recently took a unanimous vote to begin repealing its Renewable Portfolio Standard, which requires 15% of retail electric sales to be derived from renewables.

Water consumption is another important consideration for manufacturers operating in the arid Southwest, and Arizona’s industry leaders have pioneered novel solutions that prioritize conservation in an otherwise water-intensive process.

After TSMC announced its initial $12 billion investment in American chip manufacturing, the company pledged to achieve 90% water reclamation across its Phoenix operations. This will be accomplished by building water treatment facilities capable of converting industrial wastewater and redirecting it back into chip fabs for productive use.

By proactively taking steps to increase the abundance, reliability, and affordability of electricity and natural resources, Arizona legislators and regulators are signaling to the chip industry that the Grand Canyon State is eager to take on President Donald Trump’s call to reshore manufacturing and secure America as a global technology leader for decades to come. More states can learn from Arizona’s example by pairing principled state policy with a pro-innovation regulatory environment.