By Audrey Jensen | Phoenix Business Journal
Not long after Taiwan Semiconductor Manufacturing Co. announced its decision to build a $12 billion factory in Phoenix, real estate firms started buying up hundreds of acres in the nearby Deer Valley submarket, which is home to one of the largest job corridors in Phoenix and spans more than 50 square miles.
New York-based Mack Real Estate Group, for example, purchased 224 acres near the Phoenix Deer Valley Airport to develop several million square feet of industrial space at Mack Innovation Park — it’s one of the largest industrial projects proposed for the area in recent years and is also a designated site for semiconductor suppliers.
Artist rendering of Sunlit Chemical manufacturing facility in Phoenix.
Following the developer’s proposal, Taiwan-based Sunlit Chemical was one of the first TSMC suppliers to announce plans for a large facility in the Mack Innovation Park and recently started construction on its $100 million hydrofluoric acid plant only several miles east of the chipmaker.
With thousands of new homes and commercial space also poised to support the new semiconductor factory, known as a fab, and burgeoning technology corridor in north Phoenix, real estate experts say the planned chip facility has changed the landscape for the industrial market in Deer Valley, with numerous semiconductor-related tenants and small-to-large industrial buildings in the works.
“As of 14 months ago, we started seeing the uptick in suppliers calling us that are going to be part of the TSMC plant,” said Chris Rogers, an executive vice president with DAUM Commercial Real Estate Services. “At first we didn’t think it was going to be as significant as it became, but that’s been a big bolster to that market. Lots of companies are coming from out of state, as small as 3,000-square-foot suppliers to as large as 250,000-square-foot suppliers.”
The north Phoenix area comprises about 200,000 residents, three large freeways, Sonoran desert land and several large employers all located north of Cactus Road between Peoria and Scottsdale. Between residential and commercial development, the city of Phoenix estimates that about $750 million in building permit activity occurred in its Deer Valley and north Phoenix villages in 2021.
Driven by the state’s fast-growing semiconductor and industrial sectors, the area currently has several million square feet of industrial space across dozens of buildings that are proposed or under construction, but experts say there’s limited land and warehouse space left in the submarket, which has seen an uptick in costs and pushed growth to other parts of the Valley.
Competing for suppliers in Arizona
As TSMC looks to secure its supplier network in north Phoenix, the rest of the Valley and beyond, the type of semiconductor companies that will be looking for space include direct suppliers and a complex supply chain of materials, said Kyle Squires, dean of the Ira A. Fulton Schools of Engineering at Arizona State University.
Companies that use the chips made by TSMC and Intel will also benefit from being in close proximity to the semiconductors, which can create a nexus of workforce, manufacturing and innovation to support future growth of the industry, he said.
“Manufacturing is making what’s literally needed now, but if you’re not also driving what will be on the horizon or in the out years in terms of innovation and research, you’re losing, so those three things have to work together, and there’s a supply chain element to that,” Squires said.
How the companies choose a site depends on what the supplier does and access to transit, among other factors, he said. Some companies need to be closer to the fab, such as Linde PLC‘s $600 million on-site gas plant, while others will go where they can access the sophisticated tools and facilities needed to operate, which he said are in high demand and low supply.
It’s going to depend on what that supplier actually does. Some of the suppliers, they need facilities, and they need clean rooms,” Squires said. “They have to have a very clean environment. Well, so do many of the companies that are in their supplier network. Right now, that’s probably one of the biggest considerations for where a supplier is going to locate.”
In addition to the Deer Valley area, TSMC suppliers have signed leases or made plans to build or expand in Chandler, Glendale, Surprise, Phoenix and Pinal County. While some need to be close to TSMC, most suppliers need to be located within a 60-mile radius from the main semiconductor campus, which means as far south as Casa Grande, Greater Phoenix Economic Council officials said.
Lighter industrial uses may flock closer to Deer Valley, but large manufacturers that need new facilities may find the needed land and workforce in Pinal County, he added. Several suppliers, including Taiwan-based KPPC Advanced Chemicals, or Kanto PPC, have chosen vacant sites in Casa Grande for their facilities due to lower overall costs for a rail-served site, which can be a quarter or a third of the cost as a site in Phoenix, and faster air quality certification and permitting processes than in metro Phoenix.
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