Every day, people worldwide use devices requiring microchips that are produced by the semiconductor industry; computers, smart phones, military weapons and vehicles are only a few of the multitude. Semiconductor fabrication plants, or “fabs,” manufacture the microchips and, as with other industries (auto, for example), these companies often cluster in the same area creating a hub. What does it take to become a semiconductor “fab” hub? It takes land, skilled workers, low risk of natural disasters, favorable tax environment and solid infrastructure. Arizona has all of these attributes; however, it faces water challenges. Semiconductor fabs require tremendous quantities of highly pure water, using between two and four million gallons daily. The fact that Arizona has become a semiconductor fab given these high water requirements may seem bewildering.
Arizona’s foray into the semiconductor business began with Motorola in 1949 in Phoenix. According to the Greater Phoenix Economic Council’s website many established manufacturers have operations in the Greater Phoenix area such as Intel Corp., ON Semiconductor, NXP Semiconductors, Microchip Technology and others. In May 2020, Taiwan Semiconductor Manufacturing Company (TSMC) made the decision to build a chip factory in Arizona with a price tag of twelve billion dollar price tag, and in March 2021, Intel announced its plan to add two chip plants at a hefty cost of twenty billion dollars.
Although these companies use vast amounts of water, they also recycle aggressively. Glen O’Donnell, vice president and research director at Forrester, an analyst firm, reported that chip fabs have robust recycling practices, likening the water usage to the process of filling a swimming pool: “You need a lot to fill it, but you don’t have to add much to keep it going.” Intel’s aggressive goal is to achieve or exceed water neutrality by 2030, and its website highlights 15 nonprofit projects in Arizona that the company supports that, once fully operational, will restore an estimated 937 million gallons each year.
The argument can be made that water usage by semiconductor manufacturers is more financially beneficial to the state than can be said of other industries. While water is a necessity for many businesses, not many produce the number of higher salaried positions that semiconductor fabs do. Sarah Porter, with the Kyl Center for Water Policy at Arizona State University’s Morrison Institute, referenced City of Phoenix statistics on water saying that, “A million gallons of water can provide 200 high-paying semiconductor jobs, 30-40 lower-paying data center jobs, or about 50 still lower-paying golf course jobs.”
Though the U.S. continues to be a leader in semiconductor design and R&D, much chip manufacturing occurs outside the U.S., primarily in Asia. The addition of these chip plants not only strengthens the country’s manufacturing capacity, but it also increases Arizona’s appeal to other similar companies, solidifying its reputation as a fab hub. Plans for continued expansion will have to address whether the state can continue to support the water demands of these companies.
 Baskaran, Aiswarya. “Waste Not, Want Not – Water Use in the Semiconductor Industry.” Sustainalytics.com, 22 Mar. 2017, www.sustainalytics.com/esg-research/resource/investors-esg-blog/waste-not-want-not-water-use-in-the-semiconductor-industry.
 Shead, Sam. “Why Intel and TSMC Are Building Water-Dependent Chip Factories in One of the Driest U.S. States.” CNBC, CNBC, 4 June 2021, www.cnbc.com/2021/06/04/why-intel-tsmc-are-building-water-dependent-chip-plants-in-arizona.html.
 Gerbis, Nicholas. “Q&AZ: Are Microchips Too Thirsty For Drought-Stricken Arizona? The Answer Is Complicated.” KJZZ, 19 May 2021, kjzz.org/content/1683081/qaz-are-microchips-too-thirsty-drought-stricken-arizona-answer-complicated.
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