In Phoenix, Arizona, the divergence between industries that have benefited and suffered during the pandemic is obvious.

Kate Gallego, the mayor of Phoenix, says the US’s fifth-largest metropolis by area has “seen a tale of two cities” over the past year. While the human toll of Covid-19 mounted and hospitality businesses grappled with subdued customer numbers, Phoenix was breaking records in other areas.

Figures from fDi Markets indicate that in 2020, Phoenix attracted its highest ever annual number of greenfield foreign investments. “It really has been a complex year for us,” says Ms Gallego. “We know so many people are struggling, and at the same time, we announced our largest ever foreign direct investment (FDI) in the state of Arizona. 

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, reported in May 2020 it would build a $12bn fabrication (fab) plant in Phoenix. Other companies have followed in 2021, including Intel’s plans to invest $20bn into two new fabs near Phoenix, as the ongoing chip supply crunch fuels investment into new manufacturing capacity.

“We believe semiconductors are only going to be in more of the devices we have. We saw in Phoenix that we had existing expertise, and then we made an intentional investment to continue to build on it,” says Ms Gallego.

Rolling out the welcome mat

Ms Gallego travelled to Taiwan when Phoenix was trying to recruit TSMC, where she found her hosts “very generous with their hospitality”. Phoenix has reciprocated this through its sister-city commission with Taipei, Taiwan’s capital, aimed at providing a soft landing to TSMC and fostering connections through areas such as education, sports, arts and culture.

“We’ve worked with local hospitals to make sure there are doctors who can treat people coming to our community from Taiwan in their native language,” says Ms Gallego, who adds that local restaurants are also being challenged to upgrade their culinary offerings. “Everyone seems willing to roll out the welcome mat.”

With more than three-quarters of global chip manufacturing capacity currently concentrated in east Asia, Ms Gallego believes that creating a welcoming and tolerant innovation environment with talent will be the key to shifting the needle.

“We are never going to lead on low costs, but we can lead on creativity and a strong workforce. We made sure that all of our recent FDI partners had the chance to meet with our universities and community college leaders,” she adds.

Becoming recession-proof

Ms Gallego says that Phoenix’s chipmaking heritage began with Motorola, which “helped it grow as a community” through its R&D laboratory after the second world war. This later spawned a variety of companies, including ON Semiconductor, and developed a supply chain and technical talent pool.

“It’s a very complex series of ingredients that have come together to make us a semiconductor hub,” says Ms Gallego, who also points to a stable business environment and reliable renewable energy as other factors. “We’ve created an environment where, if there’s a problem, there are people who are ready to solve it.” 

This ecosystem is part of the city’s shift in economic development strategy. In the wake of the 2008 recession, Phoenix city leaders pivoted away from real estate reliance to make the city’s economy more export-oriented. “We wanted to refocus towards advanced manufacturing, bioscience, healthcare and technology industries,” says Ms Gallego. 

Looking ahead, she believes that a focus on people and access to education will be crucial to Phoenix’s future, while continuing efforts to green the city. 

“We have also had a major focus on mental health,” she adds, highlighting how the pandemic has made the importance of investment into this area even more clear. “Our largest new programme during my time as mayor is an investment in behavioural health and having more behavioural health units that can respond to people in need in our community,” she concludes.

This article first appeared in the June/July print edition of fDi Intelligence.