Phoenix, AZ – Money is pouring into Arizona’s semi-conductor industry. 

Intel, America’s biggest computer chip manufacturer, is spending $20 billion to build two new fabrication plants, adding 3 000 workers to the 12 000 it already employs in the state. Taiwan Semiconductor (TSMC) is spending $12 billion for a fab plant that will employ 1 600. 

A major prize would be $17 billion from South Korea’s Samsung, as three states – Arizona, Texas and New York – are competing for a soon-to-be announced investment in a massive chip-producing plant. 

Arizona and neighboring California are America’s leading chip manufacturing states. In Casa Grande, south of Phoenix, Lucid Motors is set to produce an electric car to compete with Tesla. In Chandler, Google’s Waymo subsidiary is testing driverless vehicles.

NXP (Philips) chip plant in Chandler, AZ

With seven million inhabitants, Arizona is America’s fastest-growing state. US News magazine rates Arizona as business friendly, with an economy the seventh best of 50 US states. The median wage in Arizona is $31 000, but twice that in the tech sector. Phoenix, the state capital, has seen its population double to become the 5th biggest US city. 

Metropolitan Phoenix lost 250 000 jobs from the pandemic. Hardest hit are hospitality, services and travel. While a recovery is under way, a wounded service economy remains distorted. Restaurants are finding it hard to find workers and blame generous government relief checks for keeping prospective employees at home.

The Phoenix housing market is no stranger to boom and bust. Currently there is a boom, with the median home price up 18% in the past year. During the early 2000s boom home prices doubled and then fell 53% during the great recession of 2008/2009. As shown in the Federal Reserve chart below, median home prices matched their previous high in 2018 and are now again at record levels.

Despite the new housing boom, regulators and realtors do not think Phoenix is experiencing a housing bubble.

The Grand Canyon occupies the far north and much of the rest of Arizona is desert. The state’s large population could not survive without water diverted from the Colorado River. Low taxes and minimal business regulation have drawn thousands from high-tax California. Los Angeles is only a six-hour drive from Phoenix.

The Achilles Heel for the whole of Arizona is water. Water levels in Lake Powell and Lake Mead created from dams on the Colorado River are very low. Persistent drought and below-average snowfall in the mountains are ominous indications of climate change. With water levels at 40% of normal, researchers say that if water levels fall further, the Glen Canyon Dam will no longer be able to generate electricity.  

That could lead to electricity cutbacks and water restrictions sometime in the future. 

The views of the writer are not necessarily the views of the Daily Friend or the IRR

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Washington writer Barry D. Wood for two decades was chief economics correspondent at Voice of America News, reporting from 25 G7/8, G20 summits. He is the Washington correspondent of RTHK, Hong Kong radio. Wood's earliest reporting included covering key events in South and southern Africa, among them the Portuguese withdrawal from Mozambique and Angola and the Soweto uprising in the mid-1970s. He is the author of the book Exploring New Europe, A Bicycle Journey, based his travels – by bicycle – through 14 countries of the former Soviet bloc after the fall of Russian communism. Read more of his work at econbarry.com. Watch https://www.youtube.com/watch?v=07OIjoanVGg