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A $600 billion global market, semiconductors are omnipresent. They’re the chips used for memory, processing and other systems in basically every new phone, car, fridge, TV, computer and plane.
When supply chain woes hit the semiconductor industry in Asia, U.S. companies paid the price for decades of offshoring. National employment in the semiconductor industry peaked at 676,000 in 2000, according to the Bureau of Labor Statistics. That number was 277,000 in 2022.
The U.S. had just 12 percent of global semiconductor manufacturing as of 2021, fifth after Taiwan, South Korea, Japan and China, and down from nearly 40 percent in 1990. Still, U.S. companies, heavily reliant on manufacturing in foreign lands, represented about 46 percent of global production. U.S. consumers account for roughly half of the global market.
To boost the domestic industry, the CHIPS and SCIENCE Act of 2022 will invest $280 billion over five years. Colorado subsequently enacted HB23-1260 to incentivize investments in the state with $75 million over five years. Colorado could win upwards of $5.5 billion through the CHIPS Act, according to the Colorado Office of Economic Development and International Trade (OEDIT).
Colorado was part of the first big semiconductor boom in the U.S. Before offshoring took hold, Colorado Springs was an industry hub. NCR Corp. (formerly National Cash Register) opened the first semiconductor fabrication facility in the city in 1975, followed by Honeywell in 1977.
At its peak, nine chip fabs were operating in Colorado Springs and providing thousands of high-paying jobs. The nickname “Silicon Mountain” arose, but the era ended after 30 years. Intel closed its Colorado Springs plant in 2007 after only six years of operation.
The Honeywell fab, acquired by Atmel in 2009, then Microchip Technology in 2016, “is the last one standing,” says Rodney Schroeder, the facility’s senior director of operations.
Arizona-based Microchip is the top semiconductor supplier to the aerospace and defense industry. It has nearly 20,000 employees, with about 850 based in Colorado Springs. The plant is one of the three largest domestic fabs for Microchip, along with locations in Gresham, Oregon, and Tempe, Arizona.
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“Over the years, Atmel didn’t necessarily invest in the factories here and was offshoring a lot of its new products,” Schroeder says. “The volume of wafers has been ramping down here for 30 years. When the pandemic hit, demand was off-the-charts crazy, so Microchip is putting in plans so we aren’t as reliant on our foundry partners.”
Those plans include an $880 million investment in its Colorado Springs facilities that is expected to create roughly 400 new jobs. The expansion, which is taking advantage of tax credits and other potential funding from the CHIPS Act, will “almost triple” the fab’s capacity, Schroeder says.
“This particular facility is 150-millimeter — a.k.a. 6-inch-wafer size — and it’s an operational factory. All of the tooling that we have at the site can be converted to run 8-inch, and if you can run 8-inch wafers, you can double the number of semiconductors that you can get per wafer,” he says.
“That’s what makes Colorado Springs such a great opportunity for Microchip,” he continues. “We have a full engineering staff, we have a full facilities staff, we have a full equipment staff, so we have the people. We’ll have to grow as well, because we can fill space that over the years has been unutilized.”
The expansion is expected to create about 400 new jobs, in addition to the 850 employees who already work at the fab. Schroeder says the company works with Pikes Peak State College, University of Colorado Colorado Springs, and local military installations to fill its workforce needs.
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The fab has plenty of room for growth, Schroeder adds. “Not only do we get the doubling of wafers from 6-inch to 8-inch, we can now invest in areas that have not been fully utilized over the last few years.” Case in point: Microchip is expanding production of silicon carbide semiconductors, in demand for a wide range of electrical applications, in Colorado Springs.
The expansion could also catalyze Microchip’s suppliers to build new facilities in the area. “I believe that will happen organically,” Schroeder says. “The key thing for us is making sure that our utilities costs are competitive — electricity and water rates — and we have good relationships with the City of Colorado Springs and Colorado Springs Utilities where we think that will occur long-term.”
Colorado’s semiconductor industry has also historically planted one foot firmly in Northern Colorado. Hewlett-Packard built what is now the Broadcom fab after expanding to Fort Collins in 1978. The facility is also enjoying dividends from the reshoring push: In May 2023, Apple announced an agreement with Broadcom to manufacture 5G radio frequency components in Fort Collins, which has more than 1,100 employees.
“Colorado Springs is one of two main clusters that we have, the other being Fort Collins,” says Daniel Salvetti, semiconductor industry manager at OEDIT — a new role funded by HB23-1260. “Colorado has a really strong semiconductor ecosystem, and we believe it’s poised for explosive growth in the future.”
Only 18 states have one major fab, he notes, but Colorado has two. Semiconductor manufacturing currently supports about 3,000 jobs in the state.
“The state has the full value chain here, which is not the same as other states,” Salvetti says, noting that Colorado is also home to dozens of companies in chip design, materials, equipment and packaging.
Golden-based CoorsTek is a good example. “Without that company, we basically don’t have semiconductors right now, because they make such specialized components and machinery that have basically touched every semiconductor for the past 25 years.”
Salvetti says Colorado is “quite cost-competitive” for the industry, noting that a leader of one unnamed multinational semiconductor company told him, “This is not our lowest-cost market, but it is our most cost-effective.”
Calling the CHIPS Act “a once-in-a-generation opportunity,” he adds, “Just by virtue of the government backing and providing a funding stream for these companies, we’re already seeing a flurry of activity around expanding on American soil.”
Salvetti says he sees potential beyond Colorado Springs and Fort Collins, pointing to Greeley, Brighton, Loveland, Pueblo and Grand Junction as possible expansion targets.
Electricity and water are key ingredients, and Salvetti says Colorado is better prepared than other states along the Colorado River. “It will continue to get tougher if the downstream water users don’t start working on the laws and regulations that we have here.”
Bob Cope, economic development officer for the City of Colorado Springs, says that water, or lack thereof, might stymie facilities in Arizona, where TSMC is building a $40 billion fab that represents one of the largest foreign investments in U.S. history. “There’s been recent news that Phoenix is starting to take note of the issues that they have.”
But it’s not just about water and power, adds Cope. “We still have a young, highly educated workforce and that is critical, especially for the more technical jobs. We also are a growing community, so as you look for future expansion and workforce supply, companies are telling us that they have some confidence they’ll be able to continue to access the workforce they need.”
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Cope notes that 500 people transition out of the military to civilian life in Colorado Springs on a monthly basis, and it’s a pipeline that supplies Microchip and its vendors in the area, such as Entegris, a Massachusetts-based supplier of products used in semiconductor fabrication.
About 200 of 9,000 employees now work at Entegris’ facility in Colorado Springs, but that number could hit 700 or more when construction on the company’s new Manufacturing Center of Excellence is complete in late 2024. The $600 million new facility will open with 100,000 square feet with potential to grow to 1 million in future phases.
“We’re able to bring in ex-military from these installations,” says Bill Shaner, president of the Colorado Springs-based materials handling division for Entegris. “Coming over to work with [semiconductor manufacturing] equipment is really similar to what they’ve done in the past.”
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Shaner says workforce remains one of the region’s prime allures to the semiconductor industry. “We actually went through a very rigorous process and looked at 11 different states. One of the main reasons we landed on Colorado and Colorado Springs — and I think this is a real positive — is that workforce development component,” he says. “We found states with population declines, we found states where the cost of living was really exorbitant compared to Colorado. Colorado had this blend of talent and workforce, and if they don’t have the talented workforce, they’re willing to help train people to get us the resources that we need.”
Beyond Colorado, customers like Microchip, HP and Innovaflex Foundry (formerly dPix), Entegris’ Manufacturing Center for Excellence “will serve a lot of the semiconductor fabs being built in the central U.S. but also the desert Southwest,” Shaner says. “You look at Intel in Ohio, TSMC in Arizona, Samsung in Texas, Texas Instruments is in Texas, and Intel is also in New Mexico.
“How can we optimize the lead time and logistics of serving these customers? Colorado is kind of a central hub for all of these locations.”
Shaner has worked for Entegris, primarily in Colorado Springs, since the early 1990s. He calls the industry’s rise and fall in the city “a bittersweet story,” but says he’s optimistic about the future.
“I’d say in the last three or four years, we’re seeing a lot more north american manufacturing. with the CHIPS and SCIENCE Act and the expansion that’s happening in North America, that’s really exciting to see.”
Denver-based writer Eric Peterson is the author of Frommer’s Colorado, Frommer’s Montana & Wyoming, Frommer’s Yellowstone & Grand Teton National Parks and the Ramble series of guidebooks, featuring first-person travelogues covering everything from atomic landmarks in New Mexico to celebrity gone wrong in Hollywood. Peterson has also recently written about backpacking in Yosemite, cross-country skiing in Yellowstone and downhill skiing in Colorado for such publications as Denver’s Westword and The New York Daily News. He can be reached at [email protected]
