Phoenix's big moment: How Mayor Kate Gallego is capitalizing on the 'semiconductor revolution' to establish the next global city

• Phoenix, Arizona, is the center of the US's burgeoning semiconductor chip industry.
• It's the fifth-largest city in the US, but isn't always viewed that way on the global stage.
• Mayor Kate Gallego said the city's "semiconductor revolution" could help change these perceptions.

Phoenix, Arizona, mayor Kate Gallego wants her city to receive the international respect she says it deserves. Over the next decade, she might get her wish.

In 2020, Phoenix reclaimed its title as the fifth-largest city in the United States, surpassing Philadelphia. But when one thinks of major US cities, it's sometimes left out of the conversation.

"We're still trying to prove ourselves as an important global city," Gallego told Insider. "The semiconductor revolution could be our big moment."

Phoenix is the center of the US's burgeoning semiconductor chip industry. It's the home to roughly 80 semiconductor companies, per Gallego, including two of the largest chip manufacturers in the world: Intel and TSMC.

"The semiconductor revolution could be our big moment," Gallego said.

In summer 2022, President Joe Biden signed the CHIPS Act into law. This included over $52 billion in subsidies to boost the US manufacturing of semiconductor chips, which are used to power everything from iPhones to washing machines to military equipment.

The funding, much of which is expected to flow to Arizona, isn't just about creating US jobs. It's about ensuring the US economy doesn't take a nosedive if an international development — like a Chinese invasion of Taiwan — cuts off its access to the world's leading chipmaker, the Taiwan-based TSMC. Last year, US Commerce Secretary Gina Raimondo said the US would face a "deep and immediate recession" if it lost access to Taiwanese chips.

This is why TSMC's decision to build two chip factories in Phoenix has been viewed by experts as an important development — both for the city's economy and the US as a whole.

"Phoenix has long been an advanced manufacturing city, but we feel like this is a pivotal moment for us," Gallego said. "Semiconductors are a huge part of our future."

The push to bring jobs, non-stop flights, and Taiwanese dumplings from Asia to Phoenix

In 2019, Gallego became the second female mayor in the city's history and at age 41, is among the youngest big-city mayors in the US. Before running for office, the New Mexico-born, Harvard graduate worked in economic development for one of Arizona's largest utility companies. So perhaps it shouldn't be surprising that she sees economic growth as the best way for Phoenix to make a name for itself on the global stage.

The campaign is well underway.

Over the summer, Gallego flew to South Korea, Japan, and Taiwan to advocate for Phoenix on the global stage. She said this included meeting with semiconductor companies that had already invested in Arizona and recruiting new ones to the city, particularly suppliers of TSMC and Intel.

In addition to pushing for business expansion to Phoenix, Gallego said she's also working to connect the city to Asia in another way. There are currently no direct, nonstop flights between Phoenix and Asia, a development that could benefit the semiconductor industry and the city's economy on the whole. Airlines have been skeptical that there is enough demand for these flights to make the investment worthwhile.

"I have been working on that for almost a decade," Gallego said. "Right now we have cargo that flies into California and is trucked here. That seems inefficient to me."

Her trip wasn't focused solely on the semiconductors, however. She said she also met with some companies in the electric vehicle, air mobility companies, and food industries.

"I have committed to the people of Phoenix — we're going to improve the dumplings in Phoenix," she said. "I'm a major fan of Taiwanese dumplings."

Phoenix's semiconductor industry could face some challenges

In the years ahead, Phoenix's economy and international reputation seem poised to benefit from the semiconductor boom. But a few obstacles remain in its path.

The first of the two TSMC chip factories has faced construction delays and accusations of management and safety issues. In July, the factory's opening date was pushed back a year to 2025.

"It is the most complex project that I have seen in our city," Gallego said of TSMC's Phoenix factory. "And so we expect there to be a lot of issues that we all need to work through. We have a major investment of people coming from another country who need to learn all of our laws and regulations."

There are also concerns that even once factories like TSMC's are built, there will be a shortage of workers to fill them. Deloitte estimated that the industry could face a shortfall of 70,000 to 90,000 workers over the next few years. In response, governments, companies, and schools are working to boost recruitment and training to close the gap.

"I am working with TSMC and other partners to start raising awareness, particularly at the high school level," Gallego said. "I find a lot of young people don't know what a semiconductor job is or how semiconductors are used, and so we're trying to work to increase that awareness."

Even when factories are built and workers are trained, there's also a concern that — at least in the near term — semiconductor companies will be slow to hire. Over the past year, some businesses have laid off workers and enacted hiring freezes in response to economic conditions.

But Gallego said the hiring will come.

"A lot of the new employment in semiconductors has been in construction, and then as the fab facilities are completed, you'll see more and more of the transition toward manufacturing."