The worldwide shortage of computer chips has shined a light on the need for more semiconductor manufacturing stateside, and according to Yardi Matrix, the development of these facilities could have a major impact on U.S. industrial real estate.
Over the past 20 years, the U.S.’s share of global semiconductor production has plummeted from 37% to 12%, per data from the Semiconductor Industry Association. It’s a trend that hasn’t escaped the White House and Capitol Hill, with President Joe Biden backing a bill that would enhance U.S. chip production efforts. The bill passed the Senate this past June, although it has struggled to find footing in the House.
Nonethless, semiconductor manufacturing appears poised for a domestic bounce back with or without government help, at least if the development pipeline is any indication. Yardi Matrix reported that the rebound looks to be centered in the Phoenix metro area, which already boasts Intel churning out computer chips at its 4-million-square-foot campus in the suburb of Chandler.
Soon to join Intel, along with other smaller chip manufacturers in Arizona, is Taiwan Semiconductor Manufacturing Co. (TMSC), a semiconductor giant currently responsible for creating about half of the world’s supply. TMSC invested $12 billion in its first U.S. plant, a 3.8-million-square-foot factory in Phoenix’s North Gateway neighborhood. Not to be outdone, Intel is putting another $20 billion into a 670,000-square-foot expansion of its existing plant.
Arizona, along with Texas and New York, also is reportedly under consideration for a new $17 billion Samsung facility. The frontrunner appears to be an Austin-area site, Yardi reported, although Samsung may be getting cold feet there after the large-scale failure of the Texas power grid during storms this past winter caused hundreds of millions of dollars in damages to the company.
Of course, such large-scale industrial projects will take years to complete and be fully ready for production TMSC’s Phoenix campus, for example, isn’t slated to start manufacturing until 2024. Still, Yardi noted that with the COVID-19 pandemic exposing weaknesses in many supply chains, U.S. manufacturing could see a bump in the years ahead due to reshoring efforts by domestic companies and additional U.S. facilities built by foreign firms.
While this trend already looks to be underway in the semiconductor space, further increases to stateside manufacturing would only make local chip production more crucial. This makes the subsector one to watch among commercial real estate asset classes.