Where the CHIPS Fall: Local Labor Market Impacts of Semiconductor Mega-Investments in Maricopa County, Arizona 
The CHIPS and Science Act, enacted in August 2022, allocated $52.7 billion in direct federal funding and authorized an estimated $24 billion in tax provisions for semiconductor manufacturing facilities, research and development, and workforce training. The legislation built on initiatives introduced in 2020 and 2021 that involved federal officials negotiating directly with major chip manufacturers to encourage domestic production. These policy initiatives have spurred large capital commitments. Despite the scale of these commitments, the effects of individual mega-scale investments—those exceeding tens of billions of dollars, which are the legislation’s primary beneficiaries—remain understudied. This paper addresses this gap in the literature by analyzing Maricopa County, Arizona, the recipient of commitments from domestic and foreign semiconductor manufacturers totaling about $300 billion through the 2030s, making this the largest place-based industrial investment in recent US history.
Key Findings
- Multibillion-dollar semiconductor investment has produced substantial employment gains in Maricopa County. Quarterly employment in the affected sectors was greater by approximately 16,800 jobs on average after construction started in the second quarter of 2021 compared with before that period and by 26,500 jobs on average by 2025.
- However, few of these gains have occurred within the manufacturing sector.
- Construction has accounted for the largest share of employment gains, followed by supplier industries, where the gains have been concentrated in equipment wholesale trade and engineering services.
- Three factors account for the composition of the employment gains: Semiconductor fabrication requires little labor relative to capital; specialized suppliers maintain manufacturing operations outside Maricopa County, relocating production only after local operating scale justifies the cost; and the county’s new semiconductor facilities hired workers while the existing ones reduced their workforces.
Implications
The employment gains associated with mega-scale semiconductor manufacturing investment in Maricopa County are substantial in absolute terms yet small relative to the federal grants and tax credits that have been committed through the CHIPS and Science Act. While manufacturing employment in the county should rise as the remaining facilities enter production, both through direct hiring at the fabrication facilities and through the supplier relocation that greater local operating scale makes viable, the committed federal funds per additional job would likely remain high relative to benchmarks from the fiscal stimulus literature. The high cost reflects the CHIPS and Science Act’s primary objectives, which center on supply chain resilience rather than job creation. For communities and policymakers evaluating similar investments, the paper’s estimates help calibrate expectations about how much direct manufacturing employment such projects will generate and how long those gains will take to appear.
Abstract
This paper examines the local labor market effects of mega-scale semiconductor investment, using Maricopa County, Arizona, as a case study. The county has received about $300 billion in commitments through the 2030s under the CHIPS and Science Act of 2022, the largest place-based industrial investment in recent US history. Using synthetic difference-in-differences, we find large employment gains, but few of these gains occur within the manufacturing sector. Semiconductor manufacturing shows no measurable net change, as hiring at new facilities offsets reductions at existing ones. The gains instead concentrate in construction—13 to 33 percent above the synthetic counterfactual—and in supply chain sectors—5 to 46 percent above—which together represent about 9,700 and 7,100 jobs, respectively. More than 80 percent of the latter fall into wholesale trade and technical services rather than manufacturing. We attribute this composition to the high capital-to-labor ratio of semiconductor fabrication and to a scale threshold in supplier relocation.