00:00The U.S. chipmaking boom is here, and with it come huge challenges surrounding power, water, workers, and, of course, big tech competition.
00:08Justine Kama joins us now to unpack exactly what is going on in the space.
00:12Justine is a senior science reporter at The Verge.
00:15It's great to have you here.
00:17I appreciate your time.
00:18Talk to me first and foremost about some of the factors you see driving this huge reshoring of semiconductor manufacturing here in the U.S., Justine.
00:27Right.
00:27Thanks so much for having me.
00:29We have been seeing this bipartisan push for several years now to onshore semiconductor manufacturing, and more recently, particularly for more powerful chips used for AI.
00:46And so this has been ongoing, really, since the pandemic, the COVID pandemic, when we saw supply chains snarled, and, you know, that really opened up the conversations more around needing to make more chips in the U.S. again, after much of that had moved to Asia in previous decades.
01:09And now you see that conversation intensifying because of this AI arms race.
01:15Imagine part of that has to deal with what was known as the Chips and Science Act passed by the last Congress or the one before.
01:23It was actually one of the rare, only one of a couple bipartisan bills that President Biden was able to get done.
01:28Talk to me about the impact there and the scale of federal investment as a result of that legislation.
01:34Right. Yeah. So there has been a big investment.
01:38We're seeing a lot of that action taking place in Phoenix.
01:43Arizona is quickly becoming a hub for semiconductor manufacturing for a couple reasons.
01:50You see leading manufacturers, TSMC and Intel, expanding there.
01:56And a lot of that is thanks to the Chips Act, as you mentioned.
02:00So TSMC and Intel both have received billions or have been awarded billions of dollars in funding from the Chips Act as part of that push to make more chips here in the U.S.
02:11Since you mentioned Taiwan Semi, is there still a bit of a geopolitical risk and overhang to Taiwan Semi, given its space in the general semiconductor arena with geopolitical pressures from China, the Trump administration and beyond?
02:26Is that part of the story very much on your radar?
02:29Yes. I mean, obviously, TSMC as a major chip chip manufacturer, you know, that is a company that lawmakers have really wanted to entice here in the U.S.
02:43There is a lot of talk of making sure that the U.S. has access to the most advanced chips and that that the U.S. is not falling behind China or, you know, doesn't have access to technologies that that China has.
03:00So there's definitely a lot of that conversation taking place.
03:03You know, Taiwan. With a lot of manufacturing taking place in Taiwan right now, I think TSMC also has to consider resource limitations in a smaller nation and their ability to expand a very resource intensive industry when it comes to the amount of water and and electricity that manufacturing requires.
03:31And then obviously just ensuring that these chips aren't being manufactured only in one place, which is the geopolitical risk as well.
03:43Yeah. Speaking of resource intensive, let's go back to Phoenix, Arizona.
03:46How does the state of Arizona in its ambitions to become much more of a significant chip hub prepare for this type of boom?
03:55Right. Well, you know, one of the one of the advantages.
04:01That Arizona has had is that there has been historically a semiconductor manufacturing footprint there.
04:08And so Intel has had a history in the state for decades since the early days of chip manufacturing, really.
04:16And so that allowed the state to work closely with companies and expanding infrastructure that was, you know, had already been started to to expand infrastructure that was already somewhat in place,
04:32as well as, you know, enticing other companies once you have Intel and TSMC here that really attracts other businesses along the manufacturing supply chain.
04:49That said, there also are a lot of challenges when it comes to making chips in a desert.
04:56Like I mentioned, this is an industry that requires a lot of water and power.
05:03And those are things that, you know, residents are really concerned with, particularly as we've seen Arizona, you know, cope with droughts.
05:12And that's something that it will have to contend with more, you know, as a result of the landscape, climate change.
05:20And also now you have more companies coming in and and needing to share those water resources as well.
05:27And do you see the limitation on some of those resources as being among the biggest production headwinds in all of this, things like energy, power grids, water usage, et cetera?
05:38And how big of a challenge is it to really overcome some of those potential pain points?
05:44Right. It's it is a significant challenge.
05:48You know, the industry has acknowledged that it's going to need a lot more electricity for manufacturing.
05:55They're also contending with a similar trend in data centers using a lot more electricity.
06:00You've seen electricity prices rise in the U.S.
06:05That has also led to more pushback from residents against both data centers and also in Phoenix against semiconductor manufacturing facilities as well.
06:16And then particularly in Phoenix in a desert area, concerns about water use as well.
06:23These chip factories or fabs, they use what's called ultra pure water because these chips are very sensitive.
06:31And so making ultra pure water, it takes more municipal water to create a smaller amount of ultra pure water.
06:38And so that's one of the reasons why these facilities can be so resource intensive.
06:44On top of that, you have, you know, like you mentioned, if you are talking about making sure that the U.S.
06:53is competitive in manufacturing against places like Taiwan where this industry has been more active, costs are a concern.
07:06And so it is generally, you know, going to be more expensive when you're making chips in the U.S.
07:13with labor operational costs and, you know, dealing with those resource issues like rising electricity prices.
07:24And so these are all headwinds that the industry is going to have to face.
07:27And finally, it really seems as if pretty firmly planted in the race are Google and Amazon in terms of chip competition.
07:36Does it shift competition away from NVIDIA?
07:39And how are you viewing that bit of a proxy battle, especially that we've had the last few weeks,
07:43which at least in the in the eyes of Wall Street, it seems like we've had this kind of alphabet versus NVIDIA thing going on.
07:49Well, it's important to note that you have these fabless, they call them fabless or factoryless chip designers like NVIDIA.
08:00And so they're designing next generation chips or not necessarily manufacturing them at commercial scale.
08:06A lot of that is is, you know, is outsourced, is done by TSMC, you know, for example.
08:13And so what we're talking about is kind of a it's a part of that larger ecosystem that you're you're you're mentioning,
08:24but you're kind of zooming in on what's happening with these manufacturers in particular.
08:31And so, for example, TSMC started producing some of NVIDIA's chips in Phoenix this year.
08:38And so it's a little bit out of that fray, I believe, or I'm looking particularly at the manufacturing side rather than this kind of design side,
08:49which is a whole nother a whole nother world.
08:52Sure. All right.
08:53Justine Kama is senior science reporter at The Verge, helping us make sense of a at times very complicated,
09:00but very important story that's going on with semiconductors.
09:03Justine, thank you.
09:04Thanks so much.
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