Chipmaker Dreams on Hold: Construction Delays Plague Arizona as Suppliers Rethink US Expansion

Plans to bolster America's chipmaking industry hit a snag as several key suppliers to Intel and TSMC are delaying or scaling back construction projects in Arizona, according to Nikkei. The primary culprits? Soaring construction costs and a lack of available workers.

This news comes despite initial enthusiasm from these suppliers. Many, like LCY Chemical, a major provider of high-purity chemicals, had secured land near Casa Grande, strategically located for its proximity to Intel and TSMC's facilities. The vision: a robust ecosystem supporting the chip giants.

However, economic realities are throwing cold water on those plans. The CHIPS and Science Act, intended to incentivize domestic chip production, has yet to finalize subsidies for material and chemical suppliers. With costs skyrocketing and chipmaker expansion slowing, suppliers are taking a cautious approach.

"It's more efficient to produce chemicals in Asia for now," says the head of LCY, opting for continued seaborne shipments rather than a costly Arizona plant. Similarly, Solvay, a leader in hydrogen peroxide for chipmaking, has paused construction altogether, citing concerns over expenses and the pace of expansion by Intel and TSMC.

Other suppliers are echoing this sentiment. Chang Chun Group, another hydrogen peroxide producer, has significantly downsized its planned Arizona facility due to cost overruns.  KPCC Advanced Chemicals has also postponed construction of a high-purity sulfuric acid plant.

These delays pose a significant hurdle to the US's ambitions of bolstering domestic chip production. While the CHIPS Act offers hope, its immediate impact on suppliers remains unclear. Until costs stabilize and subsidies become a reality, Arizona's chipmaking dream may have to wait.

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