Arizona’s Maricopa. County: No Water, No Workers, No Chips >> Climate Planning Could Doom TSMC Arizona Expansion

Taiwan itself, the industry’s huge energy and water consumption are a source of controversy and difficulty. Not only have droughts on the island occasionally slowed production, but the company’s own water consumption rose 70 percent from 2015-19.
Furthermore, Taiwan knows that its real special sauce is precisely the technically skilled workforce that the United States lacks. 

Water risk brings political risk for companies. 

It would be better to direct capital allocation to climate resilient regions.

• Yet TSMC has doubled down on Phoenix, a place without a reliable long-term water supply for industry, little in the way of renewable energy, and a construction freeze that will make it challenging to house all the workers it needs to import.

ARGUMENT

An expert's point of view on a current event.

No Water, No Workers, No Chips

TSMC and other tech giants need to take climate into account or risk seeing their investments go up in smoke.

By Michael Ferrari, the chief scientific and chief investment officer at Climate Alpha, and Parag Khanna, the founder and CEO of Climate Alpha.

U.S. President Joe Biden tours the TSMC Semiconductor Manufacturing Facility in Phoenix, Arizona, on Dec. 6, 2022.

U.S. President Joe Biden tours the TSMC Semiconductor Manufacturing Facility in Phoenix, Arizona, on Dec. 6, 2022. BRENDAN SMIALOWSKI/AFP VIA GETTY IMAGES)

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AUGUST 4, 2023, 8:28 AM

"All roads lead to Phoenix. On the gravy train of greenfield investment riding on the back of Inflation Reduction Act legislative incentives in the United States, no county ranks higher than Arizona’s Maricopa. 

• The county leads the nation in foreign direct investment, with Taiwan Semiconductor Manufacturing Corp. (TSMC), Intel, LG Energy, and others expanding their footprint in the Grand Canyon State. 
• But Phoenix is neither the next Rome nor the next Detroit. 
• The reasons boil down to workers and water.

First, the labor.  America’s skilled worker shortage has been well documented since before the Trump-era immigration slump and pandemic border closures. Especially in the tech industry—the United States’ most productive, high-wage, and globally dominant sector—a huge deficit in homegrown engineering talent and endlessly bungled immigration policies have left Big Tech with no choice but to outsource more jobs abroad.
Arizona dangled its low taxes and sunshine, but TSMC has had to fly in Taiwanese technicians to jump-start production at the 4 nanometer chip plant that was meant to be completed by 2024, but has been delayed until 2025 at the earliest.

. . .But the next slowdown they may face is Arizona’s dwindling water supply. In just the past year, Scottsdale cut off water to Rio Verde Foothills, an upscale unincorporated suburb on its fringes, due to the region’s ongoing megadrought and its curtailed allocation of Colorado River water. This was followed by Phoenix freezing new construction permits for homes that rely on groundwater.

• Forced to find other sources, industry players have stepped up buying water rights from farmers, essentially bribing them to stop growing food that would serve the region’s fast-growing population. 
• Then there are the backroom deals involved in an Israeli company receiving the green light for a $5.5 billion project to desalinate water from Mexico’s Sea of Cortez and pipe it 200 miles uphill through deserts and natural preserves to Phoenix.

> INSERT

Wccftech

TSMC Might Spend NT$ 1 Trillion For New 2nm Plant - Shares U.S. Chip Plant Update

With all the uncertainty over both water and workers, this begs the question of whether the semiconductor company the entire world is courting would have been better off establishing its U.S. beachhead in the upper Midwest or northeast instead? 

. . .Meanwhile, in Taipei, there are far more complex geopolitical consequences to consider. TSMC has long been considered Taiwan’s “silicon shield,” a leader of industry so important that a conflict that took it offline would be a major own-goal for China. But it is precisely the combination of the China threat, environmental stress, and pandemic-era supply chain disruptions that convinced TSMC’s customers that its home nation represents too large a concentration risk.

Now TSMC and its rivals are expanding production from Japan to the United States, Europe, and India. This globally diversified set of chip manufacturers is easier for China to exploit as countries more susceptible to Chinese pressure become less rigid in compliance with U.S.-led export controls over advanced technologies.

• At the same time, if the United States no longer depends on Taiwan itself for the majority of its semiconductor supply in just five to seven years, will it be as willing to defend Taiwan militarily? 
• This, not Ukraine, is what Beijing is watching for as it pursues its own “Made in China” quest for self-sufficiency.

Industrial policy is back in vogue as a national security and economic strategy. But to get it right requires aligning investment into industry and infrastructure with the geographies of resources and resilience. The countries that build climate adaptation into their strategies will be the ones that build back better."

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TSMC Seeking up to $15 Billion from Federal Government for Arizona Chip Plants

Article originally posted on Phoenix Business Journal on April 21, 2023

Taiwan Semiconductor Manufacturing Co. is seeking up to $15 billion in tax credits and grants from the federal government to support its Arizona semiconductor plants amid concerns about subsidy criteria, the Wall Street Journal reported Wednesday.

TSMC expects to receive $7 billion to $8 billion in tax credits under the CHIPS Act, in addition to $6 billion to $7 billion in grants for its Arizona plants, according to the WSJ, citing people familiar with the matter.

TSMC is investing more than $40 billion in building two fabs in north Phoenix, marking one of the largest foreign direct investments in the state and U.S. history. It plans to employ more than 4,500 workers at its Arizona campus where it will produce 3-and-4 nanometer chips, the Phoenix Business Journal previously reported.

TSMC has expressed concern about CHIPS Act subsidy criteria, including rules that would require the company to share some profits with the U.S. government if returns exceed projections. The company is concerned that economics of its Arizona project may not pencil out if profits are capped by the government, according to the WSJ.

Find the Complete Article Here: https://www.bizjournals.com/phoenix/news/2023/04/20/tsmc-seeking-15-billion-for-arizona-chip-plants.html

Aerial photos show TSMC construction progress in May 2022, about a year after breaking ground. TSMC reported in an earnings call Thursday it hired 900 workers in Arizona for its north Phoenix fabs.

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Foreign Policy

2 days ago

Climate Planning Could Doom TSMC Arizona Expansion

AZ Family

Expert: Microchip plant in Phoenix won't impact Arizona's water supply

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Taiwan News

TSMC sends deputy director to 'rescue' delayed Arizona fab | Taiwan News | 2023-07-06 18:15:00

Electronics Weekly

TSMC Arizona plant delayed