Marketplace - A visit to the “Silicon Desert”

Episode Date: April 30, 2024

Phoenix has been in the semiconductor business for a while now, but the Biden administration is taking it to another level by sending a major infusion of cash to tech companies in the desert city to expand chip-making capabilities. In this episode, “Marketplace” host Kai Ryssdal visits Phoenix with Washington Post columnist Heather Long. They dig into the challenges of rebuilding the country’s semiconductor industry.

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That is greenlight.com slash million. On the program today, it turns out if you build it, they really will come from American public media. This is MarketPlex. ["The New York Times"] In Los Angeles, I'm Kai Rizdal. It is Tuesday, today the 30th of April. Good as always to have you along, everybody. This will, I believe, sound familiar.

Specifically, it's the sound of an apartment building going up, this one in downtown Phoenix, Arizona. We were there last month to do some stories for our series Breaking Ground about how the Inflation Reduction Act, the Bipartisan Infrastructure Law, and the CHIPS Act are changing this economy in complicated, invisible, and sometimes contradictory ways. The CHIPS Act is especially relevant here in Phoenix. Nice job parallel parking while everybody watches. That's Heather Long. You've heard her on our air on Fridays for years. She's a Washington post columnist and an editorial board member. And we have been talking for a while now about where we could go to tell the story of this

economic moment. It's a moment when the future of this economy depends on the federal government playing the long game. All the stories we've done in this series so far have been about that. That street in Las Vegas where an infrastructure project is going to change lives years down the road. The investments in sustainable aviation fuel that, eventually, are going to make flying less environmentally damaging.

All the stuff built and all the programs started during the New Deal that are still affecting this economy almost a century later, and everything happening in Phoenix right now. Hi, Heather Long, how are you? Hey, it's good to see you in person. Having never seen you before in real life. First of all, let's get out of the road.

Yeah, that sounds good. She had just gotten off a plane from D.C., I had come in from L.A., and we met on this block full of construction cranes, right in downtown Phoenix. Why are we in Phoenix? Kai, this is ground zero for the new economy. I mean, the people are here, the money's coming here,

one of the fastest growing areas of the country, and they're about to get an even bigger infusion of cash from the federal government for the semiconductor, whatever we're trying to do. Bonanza, right? Yeah, bonanza, that's a good word. The CHIPS Act is pouring money into Phoenix in the billions of dollars to try to make the United States more competitive.

The Biden administration is making a bet that semiconductors, those chips that go into basically everything these days, from cutting edge AI computers to microwaves, are what this country needs to ensure its economic future. But it's not all upside risk. It's not all rosy, and I know we're gonna talk about that too.

This is also a place that can get to 120 degrees all upside risk. It's not all rosy and I know we're going to talk about that too. This is also a place that can get to 120 degrees in the summer and it's not fun to be outside. But it just, this is clearly, it feels, it reminds me a little bit of San Francisco in the 90s or early 2000s. You can feel the rocket ship ready to take off. You might not want to be here, You can decide, but something is happening. To be clear, that something was going to happen with or without the federal government. Phoenix is one of the fastest growing cities in America, almost 200,000 new residents since 2020, and it is

getting bigger every day. This city is changing how it grows, right? Used to be population only, right? More people would come and that would be economic growth. Now it's technology as a driver, right? The city's trying to change. Definitely. I think the city, you're right, has always been about population, also expanding out and out and out.

Yeah, yeah, yeah, sprawl. You saw that from the plane, right? Definitely, again, looks like L.A. Right, but now they're trying to do something a little bit different, and it's not the Detroit Ford factory that our parents and grandparents grew up with. It's not the coders that were so hot in California. It's a mix of all that.

Jobs in semiconductor factories, FABs they're called, require highly specialized skills. Chips get made in temperature controlled clean rooms free from fingerprints or even dust. And they're doing it at scale. There are huge facilities that are happening here. TSMC and Intel as well. They're doing it in a way that will change

the economy of a whole city. Well, and possibly a whole country. If it works here, Ohio wants this, Texas wants this, Upstate New York wants this. What's standing in the way of it working here? Well, I mean, what everybody keeps telling us in the headlines is where are all the workers? Yeah. Across the country, they need in the next few years, it depends who you ask, but 60

to 70,000. That's pretty fast growing industry. It is. So they need all those people to come here, more people than have come already. And let's get to some of the negatives. We're standing at the construction site. I mean, one, two, three, there are three construction sites, maybe four on this block. Looks like they're all apartments, but it comes with some downsides, all this growth

does. Well, you're right. Phoenix, UNI, Marketplace, and the Washington Post have both done stories in the last several years about the rapid home price inflation in the area. I was even speaking to a woman who has a $170,000 a year job, part of this semiconductor boom. I mean, that sounds like a pretty good job to me. And she just, half the conversation was, but I don't think I can afford a home, even on that. And that was kind of mind blowing. I'm sure it depends what you want, but it was eye-opening.

Even with the good job, you're right, the inflation has been worse than average in Phoenix and they can't build the housing fast enough to accommodate being one of the fastest growing cities, not just since the pandemic, but even several years before the pandemic. before the pandemic. Can we talk time scale here because this is going to take, you know, a big semiconductor plant takes years to build, many billions of dollars. I don't want to prejudge this, but the odds are long that this actually works out the way everybody's planning, no? I think you're right. Maybe is an okay answer too. I mean we're

all trying to be hopeful, you know, when I watch our government spend 50 billion for nothing, but you're right. Can you train enough workers? Can it be sustainable? I think that's one of the deep questions economists are very skeptical that even with all this being built, can the United States of America be competitive in this landscape? Two things before we go too much farther. First of all, this is an election year. And whether people are thinking about it or not,

among all the other things this election is going to be about, is what role the government is going to play in this economy. And actually, that's point number two, that the CHIPS Act and the Infrastructure Law and the Inflation Reduction Act are the Biden administration putting the government firmly and farther into this economy. The United States used to be the epicenter of semiconductor production. Today though, not so much. Only about 10% of the world's chips

are made in American factories. Most of them come from Taiwan or South Korea, Japan or China, which Washington says is a national security issue. So through the Chips Act, the government is putting its thumb on the scale, trying to tip more of the semiconductor industry back here. And that brings us to our second tip more of the semiconductor industry back here.

And that brings us to our second construction site of the day. You drive north out of downtown Phoenix, past the shopping centers and new housing developments, and eventually you hit brown deserts. And then... This is the biggest, one of the biggest construction sites I've ever seen. Looks like an airplane hanger except on, you know, steroids or something. It's enormous. This is the future site of not one, not two,

but three semiconductor factories being built by TSMC, Taiwan Semiconductor Manufacturing Company. And with more than 50% of the global market share, TSMC is the undisputed leader in this industry, especially for the highest end chips. And it's chosen this site in North Phoenix to spend $65 billion. I should point out here, just for context, that the Chips Act itself only has $53 billion to dole out.

So this was coming in, whether or not the Chips Act happened? Part of it, part of it, right? part of it was 2020 and then the second one in May of 2020 while much of the economy was in pandemic lockdown TSMC announced plans to build a factory here. Two years later, after the chips act passed it announced plans to build a second factory on the same site. I'm not sure if we're looking at the first or the second one. There's already like a massive warehouse looking around. There's a big chunk of it we can't see behind all the construction. And it's going to get even bigger. Just a couple of weeks ago, with more than $6 billion in new grants from the CHIPS Act,

TSMC announced plans to build its third factory. The parking lot we're standing in has room for hundreds maybe thousands of cars. Right now it's used by construction workers and at three o'clock on a weekday afternoon it's busy. Mud splattered trucks and SUVs and workers taking off boots and dusty clothes. Oh wow yeah they're just coming off. Coming off shift. Here we go. Heather Long, observant reporter that she is, starts taking note of the license plates. Oh, that's a good little hint, Texas license plate.

There's a California, another Texas. Wow, that's a Colorado. Nevada. TSMC says there are more than 12,000 workers on this job site every single day. New Hampshire, that guy drove a long way for this job. But this project isn't the only one drawing construction workers to Phoenix. President Biden was in town the same day we were

to announce $8.5 billion in Chipsack grants to Intel. And then there are all the chemical suppliers and chip packaging companies lured here by TSMC and Intel, and getting all of those factories built is going to take more workers than this area can supply. Oh wow, that's a Michigan flag on that vehicle. Go Blue! Point of fact, a lack of skilled tradesmen is one reason that TSMC says the expected completion dates for these factories has to be pushed back.

I'm actually surprised how much they have done for all that you hear in the headlines of delay, delay, delay. Yeah, but we're in mid, early mid 2024. We haven't got a year, you're right. Right? I mean, it's gonna take a while. This particular parking lot didn't have a gate on it, so we just drove right in. But as we tried to talk to some of the workers heading to their cars, a beat up old pickup truck labeled Security flagged us down. There's security too. We didn't last five minutes until security got all of us. The first of these factories isn't going to open until next year. The third, if it all goes to plan, is supposed to open before the end of the decade.

But the jobs building those factories? They're here right now. These plants are essentially chemical plants. They're not just chip manufacturing plants. The work of training workers for this new economy after the break. This is Marketplace. I'm Kai Rizdal. I was in Phoenix last month along with Washington Post columnist Heather Long, to report on

the long game that the federal government is playing in this economy as it tries to reshape the semiconductor industry and, with it, the future of manufacturing in the United States. And after we visited that huge TSMC construction site, we made another stop at a training center run by the local pipe fitters union. That's bigger than I thought. Yeah that was an ongoing theme of our time in Phoenix. Everything was bigger in person and this training center we're talking about multiple buildings almost like a mini community college and at five o'clock on a Tuesday evening the parking lot was full.

mini community college and at five o'clock on a Tuesday evening the parking lot was full. Pipe fitters are skilled tradesmen the people who design install and maintain yes pipes but not just water pipes like under your sink or in your house but pipe systems for oil refineries and chemical plants and hospitals too. Nice to meet you, this is Mike Malloy. Hi, I'm Mike. Nice to meet you, I'm Mike. Hey Mike, Kai Rezdal, nice to see you. Hi, Kai Rezdal. How are you?

I'm Travis, very nice to meet you. Good to see you Travis, how are you? Good, I listen to you all the time. Well, I appreciate that. It takes four to five years of training to become a fully certified journeyman in pipe fitting. First year apprentices start out making more than $21 an hour plus benefits. Journeymen make more than twice that and these guys Mike Malloy and Travis Laird are responsible for training them. We run an apprenticeship as well as the training center

for our local. I don't know if this is an appropriate question, but how's business? Business is good. Does that jive for you? You know what I mean? Business is very good these days. How come? Yeah, we're growing very rapidly. A lot of the semiconductor growth in the valley.

If you look around the valley, a lot of cranes in the sky. Yeah, I've seen all the cranes. So basically, that's a sign of activity for you and your tradesmen and all those guys. Yeah, we've got a couple of largest construction projects in the country here, the valley between TSMC and Intel. Remember, TSMC and Intel make semiconductors and both of them are getting billions of federal dollars to expand their production here in Phoenix. Can you just give us a little rundown and their production here in Phoenix. Can you just give us a little rundown

what a pipe fitter is doing at a place like a TSMC? Is it a bunch of faucets? Sort of talk people who don't know this world through what you'd be doing. No, and that's a good question. The fitters and plumbers work side by side, installing high-purity tubing, a lot of exotic metals as far as gas distribution, high-pressure systems.

Because these plants are essentially chemical plants They're not just chip manufacturing plants So how many apprentices give us the run down? We're just over a thousand apprentices and then how many how many journeymen we have a we have a total membership I think right now we're over 5700 members right now local 469 and historically is that a lot is it that's a lot. We're we're probably right now, Local 469. And historically, is that a lot? That's a lot.

We're probably more than 2X what we were two years ago. Two years ago? Wow. Well, so look, so the root of this question is that the government is plowing trillions of dollars into this economy, whether it's CHIPS Act or the infrastructure law or any of that, right? You guys are up 2x from two years ago So in five years with TSMC and all the rest of them online and more of their subcontractors here

What does it look like for you? Well right now we need to maintain our Target number for enrollment for apprentices is we need to be about 1,500 as where we're a little shy right? We're a little shy right now. We're a little shy right now, but we're very optimistic and things look better for us now than they have in over 30 years. How long you been doing this? I've been in the trade.

I've been a member of Local 469 for over 30 years. I've been the training director for the past two years. Travis, how long you been doing this in the local? I've been doing this for eight years. What'd you do before this? I was a math teacher here in Arizona. Explain to me that transition. One of my best friends went to college with.

When we left college, I started teaching. He got in the trade. Every year he was getting raises, making more and more money. He got paid overtime. I did not. And very quickly, it just wasn't affordable to stay teaching. And I make three, four times what I did teaching teaching and I'm back in the education field. Right. Remember this is a school there were all kinds of classes going on teaching

pipe fitters new skills. We got a couple just regular classrooms down here. This is the orbital welding lab. Oh wow. So they got their first night of class over here. So have these guys been working all day and now they're coming here? Is that the deal? Most of them probably put in at least a 10 hour day. I was just gonna say. Come for a four hour class down here.

And this is a skill not solely for semiconductors but very specific to semiconductors. Right. I picked up a piece of pipe from a big red bin outside that classroom. So wait, so what am I looking at? So this is a piece of pipe from a big red bin outside that classroom. So wait, so what am I looking at? So this is a piece of pipe that's gone, it's been flayed somehow, right? Yeah, and that's flayed just to test it. As an example, it's called a coupon, but you're

looking at key components. It's incredibly clean inside and it's very consistent weld. So every single day to start your day... Oh, that's the weld. Sorry, I didn't even see the weld. That's the weld coming. Every day you're going to cut one open, a coupon, and give it to quality control to inspect it before they'll allow you to start welding. At the end of your day, you'll do another coupon like that to show that every weld in between was a quality weld.

Oh, wow. If it's not a quality weld, you've got to start over. And this kind of welding isn't something you can learn in a day. To build these factories, you need workers trained in specialized skills that can take years to learn. So people come from all over the country into here and we send some of our instructors around the country to train other locals. We also walked past an industrial rigging class,

a semiconductor awareness class, and a computer-assisted design class. Tell me who you are. My name is Dijon Ramirez. And are you, sorry, are you an apprentice? Yes, I am. And how long you been doing that? I'm in my fifth year.

Oh, so you're almost done, right? What is it, turnout, right? Is that what they call it? Yeah, turnout. Right. I got just under a whole year left. How's it going so far, five years in? You know, I love it.

I wish I found it earlier when I was younger. I was just going to say, no pressure here, but you're not a young guy. Yeah. So how did you make the switch? What were you doing before? You know, to be honest, I worked grocery before. I was 22 years of Safeway.

I was just mentally bored, and I wanted to do something else. And it took me a while to acclimate, but I'm loving it. Is it hard work, like physically hard work? It can be. It can be. But you know, that's what all the safety regulations, you make sure you get a lifting buddy and all that. You know, there's ways to get work done and be safe

And can you inspire some people for us? What age should you make the switch? I made the switch well, I was 43 and Like I said, I wish I had found it earlier, but it is what it is. It's it's 10 to 6 at night You're in class. I imagine you've been working all day. Yeah, I do. I got out of work and came straight here. What time do you start work this morning? It starts at 6.

Yeah. You must be exhausted. Huh? At times I, you know, I don't know, like, I'm probably one of the most energetic in class. He also always has a Celsius on his desk. Oh, well, there you go. You gotta have those.

Yeah. Tell us who you go. You got to have those. Tell us who you are. I'm Bree, and I do CAD designing and drawings. So I'm not in the field like him. And how did you get into this work? So I actually designed headstones before. I did that for four years.

And it just got a little sad. And then my friend works in this. He's actually my boss now. And he got me into it, and I love it. It got a little sad and then my friend works in this. He's actually my boss now and he got me into it and I love it. And what kind of projects have you worked on so far? We're primarily semiconductor. So what does that mean? You're sitting at home or here on a computer,

figuring out where things are going to go doing the design. I'm at home. Yeah. Fully remote. But you're sitting there with the computer, figuring out the schematics and all that jazz for TSMC or whatever? Yep, so we have a modeler who puts it together and I go through and do all the measurements, the parts and make sure everything is correctly lined up.

It can fit on the truck and get out there. It's complicated. Yeah. And how old are you? I will be 25. So you found this pretty early. Yeah, yeah. I just started a year ago. We'll let you guys get back to class. Thanks a lot. Remember, they're going back for a few more hours of class after a full day of work.

These students are playing the long game. They're investing in their skills. At the same time, the federal government is investing in the long game. They're investing in their skills. At the same time, the federal government is investing in the semiconductor industry. And like Heather said earlier, Phoenix might be ground zero for this industry now, but Ohio and Texas and other places around the country are looking to make long-term investments of their own.

Investments just so we're all clear that will take decades to pay off. On the program tomorrow, there's a lot of trees out here. That tree is called an ironwood tree and it's about eight thousand dollars. A low-tech product essential to this high-tech industry's growth. This final note on the way out today, one more moment from that conversation I had with Mike Malloy and Travis Laird at the Pipe Fitters Training Center. And it kind of gets back to where Heather and I started on that block in downtown Phoenix with all the construction.

Construction that is going to need pipe fitters. As you drive around, is it a target-rich environment for you? Do you look at things? Is it, yep, there's something there, there's something there, there's something there? Oh yeah. It's all over. Like Travis said, there's a lot of cranes in the air right now, you know what I mean? And the valley is expanding so much, you know what I mean?

Just the outlying areas are now being zoned for Industrial work, you know, I mean I myself I live far on the East Valley and that was never nobody ever looked at the East Valley for industrial sites and commercial sites, you know and so since you live out there where development is common as a As a guy who's a resident not as a guy who's a union leader, what do you think all that development? Well, I mean, I think it's great for the economy, and I think it's going to be great for the residents who live out there. Because like I said, it's an industrial project

that's going to bring a lot more with it. I'm not really excited for Phoenix to look like downtown LA in the next 10 years, but that's what we're faced with. I mean, this is the Silicon Desert as they've called it, you know what I mean, and there's a huge migration from California and other places and this is where they want to build. You know what I mean? If you build it, they will come.

Yes, and they're coming. I've been working on that one all day. I know everybody's like, what? I had one when we were out there, I'll tell you what, but like I said up top, they are building it and people are coming. Our digital and on-demand team includes Kerry Barber, Jordan Mangy, Dylan Miethinen, Janet Nguyen, Olga Oxman, Ellen Rolfus, Virginia K. Smith, and Tony Wagner. Francesca Levy is the Executive Director of Digital and On-Demand. I'm Kai Rizdal.

We will see you tomorrow everybody. This is APM. All over the country, we need to improve reading in Wisconsin. Schools are changing the way they teach reading. I'm calling for a renewed focus on literacy. We have gotten this wrong in New York and all across the nation. And it's happening because of a podcast. I think your podcast has changed my life. And I'm going to share this podcast with everyone I meet.

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