Metro Phoenix Dity Inks Deal with Amkor for Largest Semiconductor Testing Facility in US

Article originally posted on AZ Central on February 21, 2024

Amkor Technology Inc. is based in Tempe. The company employs more than 31,000 people, though almost exclusively in Asia.

Amkor Technology Inc. cleared a major hurdle on its path to construct a $2 billion packaging and testing complex in the northwest Valley on Tuesday night, when Peoria’s leaders gave their enthusiastic support for an agreement to construct the project on more than 56 acres of land.

The Peoria City Council voted unanimously to approve the development agreement that commits Amkor to building the nation’s largest semiconductor packaging and testing facility and delivering about 2,000 local jobs across two phases that will span the next decade.

Amkor’s project marks an important step in restoring manufacturing jobs in the U.S., Mayor Jason Beck said at Tuesday’s meeting. It also advances microchip technology that can be found in cars, phones and, most importantly to Beck, national defense systems.

Jason Beck, Peoria mayor

“Manufacturing and bringing, specifically, tech back into, not just Peoria, but back in the United States at this level really changes our ability as a nation to be able to protect our nation,” Beck said.

The project, he continued, adds another piece to what’s soon to become a semiconductor hub in Peoria with Amkor anchoring the supply chain corner of the industry and working with the nearby Taiwan Semiconductor Manufacturing Co.

“This is the beginning, I promise you, this is the beginning,” Beck said, adding, “In the northwest Valley, everyone sees TSMC as one piece. It is everything else that comes around that. We are looking at how do we revolutionize tech, how we do revolutionize manufacturing, how do we bring jobs.”

Capitalizing on industry growth

As a leading provider in testing and packaging semiconductors for major companies like TSMC and Intel, Amkor employs about 30,000 people in 11 countries, including South Korea, Japan, the Philippines, Portugal and Vietnam, noted David McCann, the company’s senior vice president.

Amkor, which was started in Tempe in 1968, is what industry insiders refer to as an Outsourced Semiconductor Assembly and Test Company, or OSAT, he explained.

Semiconductor packaging for cellphones makes up half of Amkor’s overall revenue, McCann said. Another 21% of its business comes from testing microchips for the automotive industry.

Microchip technology, he said, has come a long way since first being used in laptops and smartphones. They are now prominently found in vehicles and will be a major component in artificial intelligence.

“We’re in kind of a new dynamic of growth with artificial intelligence, the interconnectivity of things, the sensors, the cameras, that surround us in our cars and in our environments,” he said. “That’s going to grow, we think, our business, the overall semiconductor supply chain from about $500 billion to $1 trillion by 2030.”

Amkor looks to have the new site ready to begin production within two to three years, according to McCann. The company, he said, wants to bring “our best technology here.” In doing so, it will offer a host of “good jobs” with health care and child care benefits, continuing education opportunities and career growth.

“We want this to be the leading test facility in the world and we want it to be here in the United States, in Arizona,” McCann said.

What did the parties agree to?

Tuesday night’s agreement comes roughly three months since Amkor first announced its plans to construct the campus in northern Peoria. There, it will package and test chips that are produced for Apple Inc. at TSMC’s complex by Deer Valley Road and 43rd Avenue.

Under the three-way agreement with the city and Vistancia Development LLC — the master-planned community that owns the land on which the facility will be built — Amkor agrees to meet a series of milestones, including completion of the entire project by September 2034.

As part of the first phase, Amkor will first purchase the property from Vistancia by this October. By September 2029, it must employ, at minimum, 550 full-time workers and invest at least $350 million in capital spending, such as site improvements and construction.

The company is also required to start construction by September 2025, according to the 45-page development agreement.

During phase two, the company will have to make another capital investment of $350 million and hire 300 more full-time employees.

During phase one, Amkor’s job targets must hit:

  • 300 employees by Sept. 30, 2027.
  • 425 employees by Sept. 30, 2028.
  • 550 total employees by Sept. 30, 2029.

During phase two, the company must make another capital investment of $350 million and hire 300 more full-time employees.

Amkor also is incentivized to meet the construction, investment and job-creation deadlines, as it could potentially owe the city millions of dollars for breaching sections of the agreement.

Failing to hire the minimum number of employees by the milestone dates would put the company on the hook for $5,000 a month, but not to exceed $2.4 million, until it reaches the agreed-upon goal.

And if the company doesn’t reach the $350 million investment minimum required, it would owe about $6.3 million in damages.

For its part in the agreement, Vistancia will construct the roads and develop the utilities on the land. It will then receive a $3 million reimbursement from the city for the public infrastructure.

One of the last sticking points in the agreement centered on the facility’s water use, Deputy City Manager Mike Faust told the council. The city and Amkor hammered out the final bit of details late last week.

They agreed that the city will provide a maximum of 980,000 gallons a day in reclaimed water to Amkor during the project’s first phase, and a total of 1.96 million gallons a day for both phases.

Amkor will pay the city 50% of the costs related to the treatment of the reclaimed water over the next 10 years. It also must return at least 80% of its wastewater to the city after retreating it through an industrial pretreatment program the company is required to construct.

“This is a very wise approach to a high-water demand by bringing reclaimed water as the primary then retreating it sensibly back to the A+ standard and putting it back into the larger loop,” Faust said. “(It) is a very good thing for the city.”

The city and Amkor, Faust added, also agreed, “in principle” to collaboratively design and construct a recycled water facility.

“Some of that might include treatment on their site — and it will — but we’ve also talked about some public-private partnerships and how we might leverage those things for the benefit of the community,” Faust said.

Clarifying the numbers

While Amkor and the city have touted the project as a $2 billion facility, the $700 million capital investment outlined in the agreement represents the tax revenue generated from construction, Faust said.

As for the 850 total jobs, that’s the minimum target Amkor is required to hit.

“At full scale, full tilt, we’re confident we’ll get to 2,000 (jobs),” he said. “The 850 is the base minimum inside of the contract. That’s what they’ve committed contractually, that’s the floor, that’s the minimum, with the aspiration being the 2,000.”

On the campus, Amkor’s buildings will range in height from 45 feet to about 50 feet, according to Faust. The tallest of the bunch, the utility building, is set to reach 54 feet.

Financial benefits for the city

Citing a legal and fiscal analysis for the project, Faust said the city will be in a good financial position.

“Over the 10 years of this assessment, the total fiscal impact of construction and operations will return $50 million to the state, $16 million to the county and $15 million to the city,” according to Faust. “So, a total of $81 million of tax generation is a pretty significant investment here for our city.”

A company of Amkor’s magnitude in the semiconductor industry means it can attract customers, suppliers and other businesses to the area, said Jen Stein, Peoria’s economic development services director.

With the project soon to get underway, the city is closer to accomplishing its goal of becoming a semiconductor hub, she said.

“Peoria is now on the map. This is our brand. We’re going to be known worldwide that Peoria is the place where we have advanced packaging,” Stein said, adding, “This really does give us exposure, not only locally and regionally and statewide, but internationally. We’re going to be known as a major player in this space.”