Arizona's Abundance Playbook
a view from the governor's office
How did Arizona lock in billion-dollar investments from TSMC, Intel, and LG Energy?
Ian O’Grady, Senior Policy Advisor to Arizona Governor Katie Hobbs, joins ChinaTalk to share war stories from the state that’s successfully reshoring semiconductor and battery production.
Our conversation covers:
Labor Disputes and Crisis Management — How the Governor’s Office mediates disagreements between stakeholders and keeps workers happy.
Clean Air Act vs. chips — Why Arizona’s fabs struggled to get building permits despite the state’s low per-capita emissions.
Arizona’s Abundance Playbook — Including a consolidated commerce authority, a culture of engineering > litigation, and institutional factors that help Arizona outbuild Ohio and Texas.
Taiwanifying the Desert — How Phoenix welcomed TSMC engineers with Mandarin programs in schools, Din Tai Fung, and a new Costco.
Industrial Policy Resource Wars — How Arizona avoids backlash based on power and water use concerns.
Co-hosting is ChinaTalk analyst Aqib Zakaria.
Listen now on your favorite podcast app.
Rise Like a Phoenix 鳳凰涅槃
Jordan Schneider: Ian, you show up in January 2023, after the CHIPS Act has passed, and there’s already excitement about all the fabs potentially being built in the Phoenix area. What were the first semiconductor-related priorities that landed on your plate?
Ian O’Grady: The TSMC investment was announced in 2020. That was a huge day — we were getting one fab, and we were so excited.
The CHIPS Act passed in 2021, the IRA in 2022, and then we’re coming into 2023. We have all these incentives happening. We have all the reshoring, the bringing jobs back to America effort. That’s great. But anytime we have investment incentives like that, it sets off this huge competition between states.
Every state is then showing the companies and local governments: Why does it make sense to do it here? Once that process happens, it’s: Well, okay — permits, power, people. How do we hire everyone we need to hire? How do we get those folks into jobs? From fab technicians to security guards to construction workers, which is super important. On any given day, we have about 10,000 folks up at TSMC working on the construction side, which is incredible.
We’ve been super lucky over the past few years to have a ton of expansions. Going into 2023, we knew there were a lot of opportunities in the semiconductor and battery supply chains. We wanted to make sure we got those anchors.
We have LG Energy in the East Valley. We have TSMC in the North Valley. We have Intel in Chandler, Arizona.
Jordan Schneider: You guys showed up in January of 2023. The CHIPS Act had already passed, the IRA had already passed, and there was already a commitment from TSMC to build at least one fab and hopefully more. What sort of calls were you getting? Who was bugging you? How does a governor’s office define the role it needs to play in facilitating this federal money coming into your state and being taken up by these companies that have the potential to bring enormous economic benefits?
Ian O’Grady: These were huge investments in 2023. Coming from D.C., there was an open question on the ground about how to actually implement this. First, you have to construct the fab. We focused on the construction workforce — how do we invest in these folks? How do we make sure they have what they need?
If you check the headlines from 2023, there were many labor disputes. These industries moved overseas partly because American labor was expensive and more difficult to manage. How do we reshore this? In the governor’s office, we saw this as an opportunity, but we needed to figure out how to make it work and ensure we stayed on time.
The timelines looked tough. We hadn’t done this before at this scale, and all those construction sites were active at once. Governor Hobbs announced several different programs while also serving as the go-between for the companies, general contractors on site, and workers.
This is the perfect encapsulation of the mundane stuff — on the work site, we needed more refrigerators, more porta-potties. Basic stuff to make sure we were good to go on site. We also invested in apprenticeships, which were a huge choke point for the state. We had year-long, couple-year waits for electrical pipefitters. These apprenticeships, both union and non-union, were essential for building the fab.
In December of that year, the capstone of all this was a labor agreement between the workers, contractors, and companies. It outlined safety provisions and specified how many foreign workers were coming in, because that was part of the equation. We hadn’t set up these ASML machines in the United States before. How do we set that up and ensure quality?
These companies are professional athletes — LeBron James level. They know what they’re doing. They’re willing to train American workers because they understand that long-term, they want to keep building here. Whether it’s on the construction side or the technician side, they need to train the local workforce. In those talks, we emphasized that we want Arizonans to have jobs from these projects.
Jordan Schneider: Can you describe the type of calls you receive daily as the policy advisor for workforce development?
Ian O’Grady: The great thing about a governor’s office is that it involves everyone. It’s a combination of VEEP and Parks and Rec.
In terms of who’s calling me — first, you have the workers on site: the contractors and the labor unions represented there. Then you have the feds. This was a huge priority for the Biden administration, so it’s Commerce and CHIPS. I talk to my counterpart there probably every other day to make sure we’re getting these projects online.
We use the word “ecosystem” a lot because it includes community colleges, universities, and the permitting entities for water, sewer, and power — making sure that’s all coming online. The magic is making sure all these components converge at the date they want to start producing chips, which is a ton of work.
At this first stage, it’s almost entirely a construction conversation. We have some permitting things that come later once you get to production, but right now it’s: How do we get the workers out there on site? They have intense demand over the foreseeable future — the next decade — across sites in the state.
Jordan Schneider: What are the near-term and medium-term levers for the workforce that a particular state can pull to help you beat out Texas or Ohio?
Ian O’Grady: Those are definitely the competing states.
Near term, one lever is just awareness that these projects are happening. Intel has been here for about four decades, so there’s awareness. But when you talk about TSMC or LG, there’s very little awareness of what that is, let alone that someone should go work there.
We’re trying to divert folks who are in the workforce looking for an opportunity. We need thousands of people to understand what that mission is, why it’s so cool, and why they would want to work either in building or operating the fab. That’s been relatively successful in terms of our recruiting and getting ahead of schedule on these sites.
Jordan Schneider: What does that mean exactly? Are you doing events and pushing reporters to write about this?
Ian O’Grady: This has been a partnership between the TSMC team, the Arizona State University team, our office in promoting the trades, and a lot of the local officials to talk about these opportunities.
There are also partnerships with high schools and K-12 education. This is more of a longer-term thing, but think about when you were a kid — what do you want to do for your career? Be a firefighter, be a doctor. We want “semiconductor technician” or “someone in the pipe trades” to be one of those options.
We’ve been working with the local school districts in that area to help them understand what those careers are, so you have folks graduating high school and going into those jobs. It’s those technical education districts and that whole local area that we’re really excited about.
Jordan Schneider: Does the market not figure all this stuff out? There are new jobs here, and presumably, they have to pay better than whatever the alternative is to get people to show up in the first place.
Ian O’Grady: That’s a question we get a lot, especially in Arizona where we have divided government. Many folks in the legislature believe the free market should fix this.
There are two factors at play here. First, you need an industrial base of talent that no one else is going to invest in. That’s essential not just for TSMC and Intel, but also for their supply chains. What has helped us secure so many projects is this latent base of talent that can transition — whether it’s battery manufacturing, aerospace, or semiconductors. These workers have skills from the ASU engineering school, the largest in the country, that we can attract and deploy to fill these jobs.
Certainly, companies might eventually invest in their own programs, but we don’t have time for that. We need these programs ready now, and we’ve been planning for this for the last 10 years.
The other challenge is the friction of setting up operations in the United States. Taiwan is set up to support their fabs — the times I’ve been there, it’s remarkable to see those connections. Understanding where to go in the US system isn’t easy. Our workforce system is something we’ve worked hard to simplify, creating one front door. But between community colleges and high schools, it’s still complex.
From the government side, we have to make it easier for companies to navigate because they do want to be good partners and invest in the workforce. Knowing where to go is half the battle.
Aqib Zakaria: I remember when this movement was first getting off the ground — the idea that we should build chips in America. Everyone was saying, “But we don’t have people who do that kind of work.” Unlike Taiwan, where everyone knows TSMC offers the highest-paying jobs.
I see you’re working with ASU and other community colleges to develop that workforce for the future. But that takes years to develop, and TSMC still has so many Taiwanese engineers. How do you know this is succeeding? How can you feel confident that people from ASU or Arizona are actually going to work at these fabs?
Ian O’Grady: I grew up here — Arizona State University has the largest engineering school in the country. We provide the most engineers. They usually leave. That was the opportunity: to keep those folks home and have opportunities in Arizona so they don’t have to move. Many of them don’t want to move, but they usually end up at Ford or automotive companies in Michigan or Ohio. Now they’re staying here.
How do we know it’s working? The chips are being made.
It’s been really fun to see the schedule and the progress of the facilities. I don’t know if you guys have been up to drive by either one of these — Intel down in Chandler, TSMC up in Phoenix. They’re the most amazing buildings you’ll ever see in these complexes.
In terms of connecting folks to those jobs, it’s been redirecting resources. We actually just set up a clean room for training down at the University of Arizona, so they have even more resources down there. Northern Arizona University has a really great metrology program, which feeds directly into some of the toolmaking. There’s been this demand and they’ve really answered the call on the need for these jobs, keeping up with the new technology. But it’s been keeping folks here, and that’s been — as a native Arizonan who’s moved back, I have a special kind of feeling towards that story.
Aqib Zakaria: What about ironing out the wrinkles between Taiwan workers and then the workers that are coming from ASU or that are trained in Arizona? I’ve heard a lot of stories of language barriers or work style differences. What role does the state of Arizona play trying to iron that out and make sure it goes smoothly?
Ian O’Grady: That one has been somewhat resolved by the company because they can’t bring over all these folks to operate the facility. We have Taiwanese restaurants now. The cultural integration has been really great. The Arizona Diamondbacks now host an event celebrating Taiwanese baseball and culture. It’s been something that we’re aware of, but really something that has sort of resolved itself over time.
Jordan Schneider: What about on the other side — how do you make sure the Taiwanese and Korean employees are excited to come to Arizona?
Ian O’Grady: There’s a stat the city has about how many babies have been born here from Taiwan in terms of new families setting up and being here in Arizona. There’s been a lot of work in the neighboring school district to make sure that they’re catering to Mandarin and having English immersion programs, which has been really exciting. Parents and kids here in Arizona want to learn other languages.
We’ve been really focused on childcare. These are the family parts, but we have a lot of families — a lot of senior folks who are moving here who want to be part of the community. The most exciting thing is in that area around both Intel somewhat, but more TSMC, because it is greenfield development. It’s a part of the city that was just desert. We’re building a new city, so we have an opportunity.
My understanding is the workers are super stoked about Costco — the folks who are over from Taiwan. We’re going to be building a new Costco up there, so they don’t have to drive as far. There’s a natural friendship between Taiwan and Arizona. We’ve been training the pilots from Taiwan out at Luke Air Force Base for going on four decades. There’s that natural kind of friendship happening.
Aqib Zakaria: I remember I was flying back from Taiwan a couple of years ago, and the guy sitting next to me was an engineer who was going to go work at the Arizona fab. He was originally kind of sad. He’s like, “I’ve heard there’s only one Asian store there.” Now I’m glad that there’s a Din Tai Fung and a Costco being built. It’s a little bit easier.
Ian O’Grady: There are a lot more Taiwanese restaurants. A lot of food trucks, too. It’s really coming along.
Crisis Management
Jordan Schneider: What kinds of acute crises end up falling on a governor’s office? Can you share any war stories about helping these buildouts develop?
Ian O’Grady: When we arrived, I emphasized how crucial construction was — just the ability to build the fabs. Whatever the motivation, we had to take this seriously. What did we need? What did we have to do? While negotiations were happening with the federal government, we wanted to create as friendly an environment as possible.
The first challenge was a significant worker dispute at the facility, which everyone now acknowledges we handled well. I’m proud of how we came together. In my timeline of building semiconductors in America, this was significant — we hadn’t done this in a long time.
The workers said conditions weren’t great and needed improvement. The facility folks and contractors said workers were being difficult and needed help. The company wanted to resolve this as quickly as possible. It wasn’t clear if anyone could talk to all three parties, but the Governor’s Office stepped in. We created what we called the tripartite agreement in December of that year.
The solutions were mundane but important to workers. It wasn’t that the company or contractors were intentionally withholding things — workers needed more refrigerators for their lunches, which makes sense with 10,000 people on site. They wanted greater access to porta-potties. These basic things made everyone on site really happy.
From the governor’s side, we’ve invested $5 million in apprenticeship programs because leaders said they couldn’t recruit fast enough and needed to build capacity. We gave them money for textbooks, classrooms, and equipment to build the pipeline. This also made them feel we were looking out for them overall, while serving both TSMC’s workforce needs and the contractors on site.
We also implemented a safety agreement. The state oversees facility safety, and there had been claims it was unsafe. We arbitrated this, offering a state program where they could sign on to go above and beyond OSHA standards, making it a platinum safety site.
The willingness of TSMC to learn and work with us, combined with workers’ willingness to come to the table, created a relationship we’ve really cultivated from the governor’s office. This was a priority in 2023. At one point, we thought there would be a strike — we were very concerned workers would walk off. We intervened alongside Senator Kelly’s office, facilitating required conversations that took months to resolve.
Jordan Schneider: The first TSMC fab is basically up and running, right?
Ian O’Grady: It’s producing chips.
Jordan Schneider: How do you measure a fab being “up”? Is it when you get your first wafer, or when it’s economical to operate? There’s probably a six-month window of just tweaking various manufacturing processes.
Ian O’Grady: There are different ways to think about it. Currently, it’s producing engineering wafers — they’re not the wafers that would necessarily go into production. But yes, it is producing chips. As for what’s left to finalize, that’s something for TSMC to comment on.
Jordan Schneider: What has been the hardest part of getting to this point?
Ian O’Grady: 2024 brought significant challenges related to air quality and the Clean Air Act. There was a moment when I wasn’t sure how we would permit multiple fabs.
Here’s a quick Clean Air Act primer: If you’re in a nonattainment area — meaning your pollutants exceed certain thresholds — you cannot build new major facilities unless you offset those emissions. Arizona currently exceeds ozone limits. However, 80% of our ozone comes from elsewhere; we’re not a high-emissions state. This law was traditionally written for East Coast states like Detroit or western Pennsylvania — areas with large emissions.
This makes the offset problem even more difficult. You need to find offsets within the area that can balance the emissions of the facility. These are large facilities emitting certain types of pollutants that combine to produce ozone.
The county serves as the permitting entity under federal law. The city has some involvement because we can convert buses and baggage carts at the airport to help create the permits and credits for TSMC. This remains an ongoing discussion with the EPA.
Finding those credits and ensuring compliance was an extremely difficult lift for us. The state approached the CHIPS office about the issue, then worked with the county to determine how to make the permit happen while following the law.
Permitting and Process Bottlenecks
Aqib Zakaria: I want to dig deeper into the permitting issue. Now, with data centers and the abundance movement, everyone claims permitting is the problem — that it’s too slow or nonsensical. How does it work for you to collaborate with the county level to actually get permits approved? Can we build things if we want to? Can we permit things quickly? What’s the bottleneck?
Ian O’Grady: This situation perfectly encapsulated that conversation. This was the top national priority — building out our ecosystem with TSMC and Intel in the Valley. Everyone agreed this was a priority. Yet we were bumping up against the Clean Air Act from the 1970s, which is probably the most important public health legislation we’ve had. Many studies document lives saved and how it’s cleaned up city air.
However, it wasn’t quite designed for our situation — we weren’t causing the problem here, which created an even more vicious permitting challenge. We’ve had many productive discussions with bipartisan support. The governor has met multiple times with the EPA administrator. As Churchill might say, at the last moment, we’ll do the right thing — but it took substantial work.
The first fab is always the hardest. Now that we’ve done this, we can do it again. We have a path forward. The air quality issue remains complicated because you need to keep finding offsets. If we keep building, we need to keep finding offsets in an environment where we have very few, since we’re not a high-emissions state to begin with.
We can do it. Here in Arizona, we’re the first and only state to reach this point. I believe Samsung’s facility isn’t quite operational yet in Texas, and Intel is far from being up in Ohio. Our experience demonstrates that yes, we can make this work.
Jordan Schneider: This idea of pro-business as a vibe versus being pro-business as actually dealing with nitty-gritty mundane policy stuff — does the energy that a politician brings to these questions matter at all relative to page 34 of the submission to the CHIPS Act? How much do the atmospherics actually impact these sorts of issues?
Ian O’Grady: It’s a ton. I think of this in terms of trade missions. It’s not quite the political domestic politics question of “are you pro-business?” or “how do we feel about you?” When Governor Katie Hobbs went to South Korea after we had visited Taiwan — they know us really well there — we were talking to some suppliers, making sure they’re comfortable with coming over to Arizona. That kind of openness helps.
On an international scale, I realized that in South Korea, they really hadn’t thought about investing in Arizona. That kind of openness and subnational diplomacy of talking to companies in South Korea, and showing up on their doorstep, makes a difference. It’s one thing to have a call, but it’s another thing to go to their country and say, “Hey, we have a few partners here. We want to be as helpful as possible.” That means a lot.
Domestically, the governor’s approach has been that we’ll meet with anyone — it’s always an open door. One week I’m talking to a labor union, the next week I’m talking to a free-market business group. Our work represents the state of Arizona. We’re probably the reddest or purplest purple state, and we understand that we have a really diverse business community and workforce. We need to reflect that. We can’t be too ideological. Where Democrats get into trouble, especially, is when they stop taking meetings and talking to people.
Jordan Schneider: I remember being at SEMICON Taiwan two or three years ago, and Arizona and North Dakota were the only two states that had booths. I was talking to these people and they said, “Our states invest in this. We think the human element of this sort of thing is important,” which was surprising and wonderful. It’s interesting to see how you think that pays off. At the level of vibes for other countries, there are 50 states, right? Maybe you’re thinking America, but you’re not going to literally talk to all 50. It’s just easier if there’s some sort of level of awareness and face given initially.
Ian O’Grady: A level of comfort shows that you’re trying and getting out there, showing up. But that only lasts so long because eventually companies want to see the pro forma — let’s get down to it. That’s where real policy matters. You need both elements. You don’t close a deal without the policies being effective.
An example of this nitty-gritty work — though it isn’t legislation or written policy — comes from our broadband expansion efforts, which involves extensive permitting work.
In 2023, we dealt with a company that had been waiting about two years for a right-of-way permit to dig and lay fiber. They were going from agency to agency. They’d go to the Department of Transportation, who would identify an archaeological issue and send them to the State Historic Preservation Office. After pulling a ticket and waiting in line for an archaeological study, they’d return to the Department of Transportation only to be told about wildlife issues requiring a trip to the Department of Game and Fish.
We’ve flipped that process. Our commerce authority on broadband now pilots a one-stop approach for the massive permitting exercise happening around broadband. We handle that coordination work internally, making it easier and less of a headache for companies.
It’s hard enough for American companies. Imagine meeting with the governor of Arizona about investing in the state, then discovering you have to navigate counties, cities, water districts, and utilities — all separate entities. When we streamline this process, we remove a significant administrative burden from companies. While the market might eventually figure this out, making it easier gives us a competitive advantage.
As far as the legislature goes, we’re currently in the middle of budget negotiations. Each year during the legislative session, the governor delivers a State of the State address to kick things off. Since the budget expires July 1st, there’s a race to pass the new budget by June 30th.
Throughout the session, legislators introduce bills and ideas. Both our Senate and House have Republican majorities. Unlike the partisan, intense environment my friends describe in DC, I maintain excellent relationships with my counterparts on the majority staff in the legislature. Everything we do becomes a bipartisan act by necessity — nothing gets through the legislature unless it’s a Republican bill with Republican support for the budget.
The governor has established a litmus test: Is this bipartisan? Did you work with Democrats? Does this represent the widest swath of Arizonans?
During the session, I track about 200 bills, ensuring we’re prepared for each one. Some bills we’ll never sign, and we make that clear. Others we’re happy to sign. The challenging ones fall in between — the edge cases that might upset a stakeholder or don’t quite work for us. We have to decide whether to improve them or leave them alone. That’s how I spend much of my springtime.
Data Centers, Infrastructure, and Getting the Public on Board
Jordan Schneider: What were the best and worst bills related to industrial buildout that you’ve encountered?
Ian O’Grady: There’s been a lot of AI legislation coming through about how to regulate the technology. I’ve been watching AI safety bills, particularly because the Trump executive order attempts to preempt states, though there’s a safety exception — especially children’s safety. We have a couple of kids’ safety bills in that category.
Infrastructure remains the biggest legislative challenge. It’s the limiting factor for so much of what we do. We’re a low-tax environment, which means we don’t have all the tools that other states have. Some states will cut companies checks when they relocate. Others waive property taxes or build much of the infrastructure themselves.
We do as much as we can, but we have to figure out the taxing mechanisms. How do we accomplish this without cutting government further? Since 2000, our population has increased 40%, yet we have the same number of state workers, and our economy has grown even more. We don’t want to cut existing services.
When companies come to a state, they expect roads and water pipes to be in place. How do we meet those expectations? We’ve been working on legislation to fund these projects.
Aqib Zakaria: I’m curious about AI legislation in Arizona, particularly in the context of fab buildouts. Is there a connection between the average Arizonan being happy about TSMC and Intel bringing jobs while simultaneously being skeptical of AI and data centers? Is there a mental disconnect, or is Arizona more pro-AI?
Ian O’Grady: We’ve seen similar zoning issues across the country. We’ve had a couple of very intense ones for large data centers. There’s skepticism, especially when costs are higher than they were five years ago and people are thinking, “Why are we doing this when my rates are going up?” A lot of those concerns are widespread — they’re national, they’re here.
In terms of the politics and how they’ve played out, Governor Hobbs in her State of the State speech addressed an incentive that provides a tax exemption for the chips and racks in data centers. We passed this around 2013, when it wasn’t a huge deal — they weren’t cycling out these chips every 18 months and they weren’t super expensive chips.
Now the exemption’s grown and there’s no cap on it. It was in the tens of millions of state revenue that has been lost because we don’t tax these things when they build the data centers and then refresh them. The governor said we’re the second largest market for data centers in the country next to Virginia. This tax incentive has worked. What is an incentive for us to create new markets, to bring along new industry? We should eliminate this tax incentive. We’re not anti-data center. Given the math equations we have to do in a state like ours, this doesn’t make sense anymore.
The other part is she proposed a fee on water use — a cent-per-gallon water use fee on data centers. We know that a lot of the more modern data centers are using closed-loop systems, and we don’t want them pulling water from our aquifer because we are in a desert environment. We have to be very, very wise about water.
Those were two proposals. Republicans have basically called those DOA, which has been a really interesting political calculation in terms of just the political mood. We think this is the right policy. I’ve been in those discussions that these are things that we think make sense for the state, and we’re going to keep building data centers that can keep existing, but they just don’t need state subsidy and we want to make sure they’re using our water wisely. We’re on the winning side of that argument on a few different aspects.
Data center politics are everywhere right now. It is probably one of the hottest issues.
There are two sides of the argument. One is from maybe the far left: “We don’t need this technology. This is not making our lives better.” There’s a lot of work to do on that side. I believe there are going to be immense benefits. Doing slop posting and whatever’s been produced probably doesn’t help. I’m very curious when companies produce those types of silly videos — is that really what we need?
On the far right, or maybe more of a normie argument: “Everyone else is doing data centers. Why should we?”
We’re in the middle — we want to attract, we understand they’re necessary for modern technology. We realize we have a lot of advantages in Arizona in terms of building them and we’re building the chips for them. We understand the attraction. But we’ve got to be so smart about how we do it.
Aqib Zakaria: Is the state legislature on the same page about incentives, or is there push and pull?
Ian O’Grady: It’s absolutely a push and pull. They’re still focused on cutting government and lowering taxes, period. We want to have a conversation about what incentives make sense because we do have a ton of exemptions. Every year — and you’ve seen this at the national level — we’ll exempt taxes for this and this and this. We’re asking: What’s the justification for these incentives? That’s a conversation we really want to have.
Jordan Schneider: How does state-level competition play out? Are you tracking every other state’s offerings? Does that argument resonate with the legislature? How much comes down to the inherent factor endowments of what the state has to offer versus whatever package you’re negotiating at the last minute?
Ian O’Grady: We’re competitive with other states both on a cost basis and on long-term cost over time and quality of life. There’s a whole site selector industry — I don’t know how much national folks are aware of this — but there are consultants who help companies run these competitions, line up states, and figure out where they’ll be most effective. In your analogy, these are like the agents doing this work for companies.
Ian O’Grady: While we don’t have as many upfront cash incentives as other states, the big factors that matter are:
Workforce has been a huge priority. Companies need confidence they’ll be able to hire and start on day one — security guards, cafeteria staff, engineers, PhDs. That’s a gargantuan task. The confidence I’ve seen when people come to Arizona that we can deliver on this has been great.
Power costs are very competitive. Energy is a significant ongoing operating cost, and we’re well-positioned there.
Road quality really matters. Being able to move large machines or spacecraft across an interstate is super important. There’s another very competitive city that just doesn’t have a great highway system, and that’s become a huge advantage for us.
We’ve had people come to Arizona and say the traffic in that other city is horrible — they love being able to access meetings easily here. Our airport’s proximity to downtown is another advantage that’s not always the case elsewhere.
Water security is crucial. We’re in a desert environment and have been very judicious with our water — we actually use less water overall than we did 50 years ago, which is crazy given our population and economic growth. We have a state law requiring demonstration of 100 years of water supply in metro areas. If you’re building in Arizona, you know you have 100 years of water. No other state has that. That’s been a huge asset, especially as drought conditions and water shortages have emerged across the West.
Aqib Zakaria: I’m wondering about roads. Is there a positive externality where wanting to attract foreign investment incentivizes the state to fix roads and power infrastructure? Does that mental calculus happen, or are those completely divorced?
Ian O’Grady: It certainly happens on the power side. We have economic development divisions that work on this. That’s long been part of our state’s history — we’ve built dams for hydroelectric power and then attracted new growth. There’s this great factoid from our history where utilities paired up with homebuilders to ensure new homes had plug-ins for dryer units, so they’d use the electricity being produced. Those partnerships certainly happen on the utility side.
On the road side, we just passed a new multi-billion-dollar investment in our highway system around Phoenix, and Tucson just did their own too. It really matters for getting to and from places, especially for executive-level meetings. When the board’s in town, it’s been a huge deal. More than once, I’ve been involved in figuring out permits to move spacecraft across the country on the interstate. You do this in the middle of the night so you’re not in people’s way, but being able to do that on really straight, wide roads is important.
Jordan Schneider: People are stressed out about power. You guys aren’t for now. Where does that come from? What’s the backstory there? Thoughts on broader lessons for the nation?
Ian O’Grady: We have a good mix of power. The Governor did an executive order in the fall to bring together a massive task force with utilities, businesses, consumer advocates — everyone. They just published their list of recommendations. It was the Arizona Promise Energy Task Force. Those are online if folks want to read them. I think it’s a national best practice in terms of what’s in there. Now we’re going to work on implementing those.
In terms of the mix I mentioned, we do have one of the larger nuclear facilities in the country. The Governor actually just toured it yesterday. That creates that base level — I forget exactly what percent, but it’s significant. We have some solar, some wind, and significant natural gas. Coal has been coming offline recently, but that mix has been super helpful.
Our ability to build transmission lines has been huge. We’re working with our state land department to create corridors where we can further transmission lines. That nimbleness we’ve shown versus legacy states, where you have old systems and it’s just harder to move, has been a huge benefit for us.
Aqib Zakaria: Why can Arizona build when other states can’t?
Ian O’Grady: I think about this a lot too, and I talk to counterparts in other states. One aspect is that we’ve done a really good job of centralizing this. We created a statewide commerce authority — we got rid of our old Department of Commerce and made this quasi-public entity that’s been great.
We’ve had the same CEO for a couple of decades. Her name is Sandra Watson. She’s amazing — I’d say she’s the best state commerce director in the country. Being able to act nimbly in terms of that board has been huge. You have CEOs on that board who direct where our incentives live, and you have that input. That has made us very effective in attracting businesses.
My theory on why we can build, from talking to other states and going to conferences, is that there are states where you have this layer of sediment — “we’re in oil and gas” or “we’re steel and automotive” — and that creates this drift of “that’s what we were made to do.” They can’t quite get to the next level.
Versus in Arizona, we have some legacy industries, but they’re all engineering-focused, so they actually end up being a benefit. We’re a growing state with new population coming in. We’re now retaining more of our grads.
I think of the lawyers vs engineers dynamic in Dan Wang’s book Breakneck — we have a lot of engineers. Reading his book, I was thinking there are some similarities between Arizona and some of the cities he’s talking about in China in terms of our ability to build.
The consolidation with the Commerce Authority also helps us quarterback with the localities. I’ve seen other states with really intense competition between metros where the state can’t operate effectively. In Texas, it’s Houston, Austin, Dallas — if you’re the state and a project comes, folks are fighting over who gets it.
We’re now at the stage in Arizona where everyone understands that we should celebrate each other’s wins and that there’s enough to go around. That’s a feature of years of learning and success with the major anchor investments we’ve gotten. We’re in a really good position to continue — we’ve had 70 semiconductor expansions alone in the last couple of years, which is just crazy.
Jordan Schneider: Other lessons for other states or national policymakers you’d like to share?
Ian O’Grady: I think there are some pretty basic resources you have to think about as a state. We talked about roads, but rail access is super important. That’s something we’ve been thinking about in terms of expansion — getting goods on and off the rail line and moving them across the country, especially as we manufacture them.
For national policymakers, we’re in the midst of pretty intense Colorado River negotiations. The agreement we’ve had for decades, allocating water across the seven basin states, is expiring. Our argument in Arizona is that no other state produces more advanced chips, more guided missiles, or more leafy greens per drop of Colorado River water.
Not to pick on Wyoming, but I looked up semiconductor employment by state. Wyoming had literally zero. We’re making an argument in this process — which is being run by the Department of the Interior — that yes, we understand drought conditions. We’ve put our own cuts on the table. We’re offering to cut 27% of our usage because we’re more efficient. No one else in the upper basin is offering cuts like that. But for the Trump administration, no one offers better ROI than Arizona in terms of that water.
Are you guys familiar with the book Cadillac Desert about water history in the West?
Jordan Schneider: Pitch it.
Ian O’Grady: Great book on water history. It’s from the ’80s, so it’s a little outdated. But they make this argument that I think about a lot in terms of Arizona: The ability for the United States to win World War II was based on our hydroelectric capacity in the West and our ability to produce at scale. Boeing, Northrop Grumman — all the aerospace companies emerged because they had access to that power, because we had the geological features to create rivers that could generate electricity. That’s why we were able to produce at a scale that neither Japan nor Germany could match.
That’s relevant today. When I look at how the river is being allocated, we have really clear decisions to make about where that water should go, especially for all our national priorities. We’re making that case probably on a weekly basis to our colleagues in other states and in D.C. But right now, the current direction needs to change if we’re going to be able to continue producing like we do.
Building the Ecosystem
Jordan Schneider: What’s your take on trade dynamics and foreign investment, especially with USMCA coming up for review?
Ian O’Grady: We’ve been working closely with Mexico — the Governor’s visited several times since they’re our largest trading partner. With USMCA up for review on July 1st, we’re quite concerned about the direction it’s heading.
We’ve spoken with the US. Trade Representative, and they’ve indicated they don’t think they need Congressional approval. They’ve also made it clear: “Don’t expect North America to be a free trade area.” The Trump administration’s overarching concern is preventing Mexico or Canada from becoming a backdoor for Chinese goods into the US. market.
Mexico’s own China politics are fascinating right now. The Sheinbaum administration has launched a “Made in Mexico” — Hecho en México — initiative and they’re placing tariffs on China. But when you actually look around Mexico, the new cars are mostly Chinese EVs. It’s a really interesting dynamic, and we’re working hard on USMCA issues to address these concerns from the Trump administration.
Jordan Schneider: There’s a big debate in Washington about bringing in Chinese industrial investment. The hope would be that companies like BYD, battery manufacturers, and rare earth refiners could replicate what LG and TSMC have done in Arizona. Based on your experience, how would you approach setting up or incentivizing these agreements to ensure long-term technology transfer?
Ian O’Grady: The joint venture conversation is complex, especially in automotive where there are so many competing interests.
From a supply chain perspective, Mexico is absolutely ready for chip assembly and automotive parts manufacturing. They’ve become very strong in aerospace and medical devices in recent years — they’re ready to build.
The jump to automotive manufacturing is particularly challenging. We have our first major OEM, Lucid Motors, making EVs south of Phoenix. Getting that workforce up and running was like building TSMC’s first fab — you learn so much in the process. We want to build that ecosystem, but nobody really knows what the future looks like for automotive investment right now. There are fundamental questions about internal combustion versus electric vehicles. The Iran situation and gas prices might revive the electric conversation.
Arizona has huge advantages here — we’re the number one copper producer in the country with a significant critical mineral supply chain. We’re going to be producing batteries at scale, which is generating a lot of interest. But ultimately, the market is the market.
Aqib Zakaria: I’m curious about the ecosystem aspect, since so much of this really is about ecosystem development. You can’t just have an EV fab in the middle of a state without the supporting players around it.
I wonder how you sell that vision — it’s really sexy to say “oh, we built an EV factory,” but it’s not as much of a PR win or as compelling to say “okay, we’re expanding copper production.” These supporting industries may be more commodity-based and cheaper, but they’re harder to make attractive. How do you try to actually make that ecosystem happen? It’s an enduring problem in the States.
Ian O’Grady: From a state level, we want to create what I think of as the substrate or the platform. We want good roads, good railroads, good connectivity so that we can just move heavy things. That’s a big part of critical minerals.
In terms of opportunities in mining — we’re a mining state. In Arizona, we say we have the 5 C’s: copper, climate, cattle, citrus, and cotton. Copper is the big one — our state seal has a copper miner on it. It’s very much part of our DNA. My family actually moved here in the 1870s to be miners. There’s really an awareness of it.
There are things that come along with it, too — these mines have a shelf life. We have open pit mines sitting across our state where we see the scars, but we also see opportunities. You have really innovative things happening in terms of mine reclamation and being able to extract metals at a more micro level.
We have many major mining projects coming online. We’re actually number one in terms of jobs growth and number one in terms of mineral exports already, and we don’t even have major projects online yet for new mining. Those build a lot of jobs.
At a corporate level, Lucid Motors understands that more of their supply chain is going to be in Arizona. With USMCA, it almost has to be. That’s helpful on that side. In local communities, there are pros and cons, but there are jobs coming in — these are legacy things that people remember in Arizona.
Jordan Schneider: You want to tell them about your adventure, Aqib?
Aqib Zakaria: Oh yeah — I’m from Louisiana, and while we’re not building fabs or EVs yet, we’re expanding gallium production. They’re opening up a lot of refineries, so I’m hoping to go there to see how that actually ends up working out.
Jordan Schneider: We’re going to do a work study tour. We’re going to have Aqib in the mines — we’ll see how long he lasts.
Ian O’Grady: Where does the gallium come from? Where are they extracting it from?
Aqib Zakaria: It’s a byproduct of alumina that they make. We already have alumina refineries, and my surface-level understanding is that the byproducts are actually a big pollutant, but now you can take that byproduct and refine it into gallium.
Ian O’Grady: That’s so cool. We have a mine that will produce zinc, manganese, copper, silver, and lead. It’s a site being revitalized by South32, an Australian company down in Southern Arizona.
Mining today is completely different. They’re actually running fiber lines from the town of Nogales, which is the biggest city in the county down there. They’re going to have a command center, but it’s all robots in the mine. It’s much safer. The tailings are going to be backfilled into the mine, so you’re not going to have a huge tailing site.
Aqib Zakaria: I’m jealous. I’m happy for Arizona, but I’m waiting for TSMC Thibodaux or whatever it’ll be.