Inside the US chip revolution unfolding in Arizona

Just as C.M. Lai was preparing to retire from his role as senior executive at a semiconductor supplier and step away from the industry a few years ago, an offer from United Integrated Services suddenly landed: Would he like to lead the company’s first-ever U.S. operations?

UIS, a major Taiwanese builder of chip and other high-tech facilities, counts Taiwan Semiconductor Manufacturing Co. and Micron Technology among its key clients, and at the time, TSMC was planning to build its first advanced chip facility in the U.S., in Phoenix, Arizona.

Lai decided to take on the challenge. 

At first, the learning curve was steep. “We underestimated the operating costs, the waiting time to obtain various permits and the level of detail required in the design blueprints in a different geography,” Lai, president of UIS, told Nikkei Asia. “Back in 2023, I didn’t know how long the dark tunnel would be.” 

Lai said the key takeaway from his experience in the U.S. was not to expect that simply replicating what works at home will succeed elsewhere. “You have to embrace the local culture and ways of doing things, rather than trying to copy exactly what you’ve done in other places,” he said. “If you want to copy and enforce the Asian management style here, it’s unlikely to succeed.” 

Members of Lai’s team, along with many other suppliers, spent years practically living in a “trailer city” of mobile offices set up next to TSMC’s construction site in Phoenix. The arrangement made it easier for suppliers to work together and solve problems quickly, though the working hours were extremely long at the beginning. 

At one point, Thomas Liu, project manager at UIS, recalled how he and his colleagues would start the day at 5 a.m., wrap up most of the hands-on work around 5 p.m., and then discuss key tasks for the next day until 8 or 9 in the evening. 

“I once saw a couple of young engineers in their 20s fall asleep as soon as they had the chance to sit down … You could really see how exhausted, yet dedicated, everyone was,” Liu said.

Building high-tech facilities and cleanrooms for advanced chipmaking plants requires immense expertise. Every detail from the installation of tubes and pipelines for gas, chemicals and water to the placement of equipment demands precise know-how, as these factors are closely linked to production efficiency and output quality that could impact later production line performance. Such projects involve tens of thousands of technicians and countless components, ranging from pipes large enough for a person to walk through to screws just a few centimeters long.

Timing is also crucial. Every step of construction must be precisely coordinated to ensure the overall process goes smoothly, according to Vincent Murry, a senior project manager at UIS with more than 20 years of experience in the construction industry. 

“At first, there was one point when everyone was yelling at each other hoping to have their own part of work done first,” Murry recalled. The company had to tackle complex scheduling issues and component shortages, including by setting up its own warehouses and qualifying more local suppliers. It also expanded its headcount significantly, establishing one of its largest local teams with nearly all of its 380 employees in Arizona hired locally.

TSMC has upped its investment in Arizona to $165 billion, with plans for at least eight facilities covering advanced chipmaking, chip packaging and research and development, with further expansion possible. Its original plan back in 2021, when UIS committed to set up U.S. operations, was for just one $12 billion plant.

The site in north Phoenix, once a barren landscape dotted only with saguaro and agave plants, has been transformed into a thriving hub with more than 3,000 employees that already produces advanced chips for Apple and Nvidia’s latest Blackwell AI processors. An average of around 5,000 to 6,000 construction workers are on-site each day, a figure expected to rise to around 12,000 as the largest chip investment project on American soil continues to expand.

TSMC is not the only chip titan pumping billions into Arizona. Just a 50-minute drive south in Chandler, Intel is expanding its Ocotillo Campus, which first went into operation in the 1980s. Intel recently began producing the world’s most advanced chips there, using its 18A, or 1.8-nanometer, process.

Kevin O'Buckley, head of foundry services at Intel, said the company is “extremely proud” to be making the world’s most advanced semiconductor technology in the U.S. Strengthening the chip supply chain, he added, is important for not only Intel’s U.S. customers but for “all customers globally.”

Since 2020, Arizona has attracted more than 60 semiconductor projects representing over $210 billion in announced investment and roughly 25,000 anticipated new jobs, according to the Arizona Commerce Authority.  

“There are over 600 locations in Arizona that are operated by semiconductor-related companies,” Vic Narusis, executive vice president of industry development with the authority, told Nikkei Asia. “The sector here is extremely robust and continues to grow … because we are intentionally trying to grow the largest [chip] cluster in the U.S.” 

Kate Gallego, who has been mayor of Phoenix since 2019, told Nikkei Asia that the city has invested $205 million in water, wastewater and street infrastructure to help the semiconductor ecosystem. “We made a very concerted effort to prioritize semiconductors. So in north Phoenix, we did a lot of land use planning to set aside land,” Gallego said. “TSMC has an enormous campus where there's room for suppliers and educational partners, and we really tried to plan the whole city for it.”

About an hour farther south in Casa Grande, TSMC supplier Chang Chun Group has built its first high-end chip material plant in the U.S. Situated along a major interstate rail line, the plant is now entering trial production, with the final qualification period expected to start this year. The facility will produce high-purity chemicals for advanced chipmaking, materials that have until now been largely imported from overseas.

“We have gone through quite a learning curve, understanding everything from local regulations to turning the plant’s design into reality, but it’s deeply rewarding to see the facility finally coming to life,” said Calvin Su, president of Chang Chun (Arizona), who has been on-site since 2021, overseeing everything from the land purchase to recruitment and plant operations.

Building a semiconductor ecosystem in a new region is an enormous challenge. Merely producing electronics-grade chemicals can require up to 12 months of additional testing and verification to ensure quality is up to standard. 

“It really starts to bear fruit only after the plant is fully verified and capable of mass production,” Su said. “Yet the investments needed to make that possible must be made years in advance.”

The picture becomes infinitely more complex when looking at the whole supply chain, which relies on the seamless coordination of hundreds, even thousands, of suppliers providing the chemicals, materials, gases and equipment that make chipmaking possible. 

TSMC itself acknowledged higher-than-expected costs and project delays due to workforce shortages, lengthy permit processes and an incomplete local supply chain. CEO CC Wei earlier said his company had spent around $35 million to hire specialists to help it work more closely with local officials to draft new regulations for its semiconductor facilities in Phoenix, as that location had never hosted such infrastructure before. (Intel’s plants, while not far away, are in another city’s jurisdiction.) 

“In the end, we worked together to create about 18,000 rules related to the semiconductor industry,” Wei said.

Liu of UIS also recalled being surprised by the delays that cropped up. “At first, we thought the inspection for electricity transmission in a small area would take just a day, but it ended up taking three months,” Liu said. “At the time, we weren’t entirely sure what officials were looking for … We were learning together, and together developing the procedures and standards now in place.” 

The costs and delays were sometimes painful. Several chemical suppliers to Intel and TSMC, including LCY Chemical, Kento-PPC and Solvay, put their U.S. manufacturing investments on hold at one point due to soaring costs and labor shortages, Nikkei Asia first reported, while facility builders such as UIS and Marketech International Corp. took significant hits to their profit over the last few years.

More recently, TSMC has told clients it will hike prices for its most cutting-edge chip production technologies, specifically those more advanced than 5-nanometer, next year and beyond, mainly due to higher costs of accelerating overseas expansions, sources briefed on the matter said.

But the AI investment boom and a growing desire for localized production mean investments are starting to pay off. American clients accounted for 76% of TSMC’s total revenue in the July-to-September period, the highest share ever. UIS and Marketech have both seen their market value balloon more than 60% since the start of the year, while LCY says it is ready to finally start construction of its Arizona facility.

SEMI projects that the U.S. will lead the world in chip investment from 2027. 

Brady Wang, a semiconductor analyst at Counterpoint Research, said that if the build-up of AI infrastructure continues, a more advanced chip-manufacturing ecosystem is likely to develop in the U.S. over the long run.

“Concerns about supply chain disruptions are prompting chipmakers and major tech companies to secure important production closer to home,” Wang said. “Another incentive for TSMC’s suppliers [to invest in the U.S.] is that they already support some of the most advanced chipmaking in Asia. That positions them to supply other U.S. chipmakers such as Intel, Texas Instruments, GlobalFoundries and Micron, meaning the opportunities are [going] beyond simply backing TSMC’s expansion.”

“To be very honest, there was a period when suppliers were uncertain whether their investments in the U.S. would ever pay off,” said Stacy Yang, director of Topco Scientific, a chip material distributor in Arizona. “But confidence and enthusiasm have returned, fueled by a wave of new investment commitments.”

Now, suppliers recognize the need to collaborate. Sunlit Chemical, one of the first to establish a plant in Arizona, is helping fellow chip chemical maker Kuang Ming Enterprise by storing the latter’s materials in its warehouses, several industry executives told Nikkei Asia. Kuang Ming is the sole supplier of semiconductor-grade sulfuric acid for TSMC’s most advanced chip production but does not have its own local facility. Chemical-transport specialists such as Rinchem and NRS Chemicals are also providing significant local support. 

TSMC told Nikkei Asia that such an ecosystem is essential. “Given the complexity of process technologies and designs, no single semiconductor company can address all challenges independently,” spokesperson Nina Kao said.

Topco has also become an important connecting point, helping other chemical, materials and equipment makers, many of which lack the resources to establish a full local presence, provide on-the-ground services. “We are aiming to create a supply chain platform so that some small-to-midsize suppliers can expand overseas more easily and avoid a lot of hiccups,” said Topco Scientific’s co-CEO Danial Wu.    

Such cooperation is especially important in areas that lack the established production clusters of Taiwan or other Asian hubs, according to Joe Chou, president of construction and engineering specialist Rayzher Industrial. “This effort requires not only chipmakers, but also a full supporting supply chain,” Chou told Nikkei Asia. 

“Overseas markets already have their own supply chains, but they tend to be more fragmented,” he said. “It’s different from Asia or Taiwan, where suppliers are clustered closely together and the ecosystem is highly integrated. But the current geopolitical push is creating new incentives and opportunities for companies like ours to look beyond our traditional bases.”

Chou said his company is setting up an initial task force of about 50 people, which will expand to roughly 100 by 2027. He expects significant growth to come from overseas markets. “The U.S. is the most important one, given the scale of future investments taking place here.”

Others share Chou's view. “It’s the dawn of a new era of going global. … The next big opportunities lie overseas,” Frank Liang, chairman of chip packaging equipment maker Gallant Micro Machining and general manager of C Sun, told Nikkei Asia after his first-ever trip to Arizona. “We met a lot of peers and are really starting to think about setting up operations locally.”

Back in Taiwan, some worry that the island’s flagship chip industry, which accounts for about 15% of its gross domestic product, could lose its competitive edge as TSMC, its largest and most profitable company, and its army of suppliers invest heavily overseas. 

But industry veterans like Lai of UIS say it’s time to think more positively. 

“In Taiwan, we face shortages of land, electricity, and even talent when looking at longer-term growth,” he said. “People can also think positively. It’s not about hollowing out the local economy. Instead, these massive overseas expansions can also be seen as a way for Taiwan to extend its influence and capabilities abroad."

Additional reporting by Yifan Yu