The tiniest tug-of-war

On the world’s biggest stage … Operatic AI … And liquid robots aren’t just in the movies.

The U.S. and China are locked in a bit of a war right now.

No, it’s not about tariffs.

It’s a tug-of-war over the tiny computer chips that power the artificial intelligence industry.

And Arizona is right at the center of it all.

For as long as AI has been around, the U.S. has been the global leader in manufacturing the specialized machines that make those chips.

But last week, a Chinese company called SMIC announced it could make advanced chips for AI and servers, without relying on the machines controlled by the U.S.

Right now, “uh oh” is probably echoing around the boardrooms of U.S. tech giants.

Until now, the U.S. government could limit China’s tech growth by restricting access to those machines and the chips needed to make them.

Not anymore, apparently.

Last week’s announcement showed China is finding new ways around those limits, although their method still isn’t as efficient as the ones used by U.S. tech companies.

Now that the game has changed, it could put a damper on Arizona’s exuberant attitude about “emerging as a hub for AI-driven hardware and software innovation,” as the Arizona Technology Council described it in their 2025 technology outlook.

Arizona has been riding a rising tide of high-tech companies building factories in the Grand Canyon State for the past few years.

Taiwan’s TSMC built massive factories in Phoenix to produce advanced chips. In fact, they broke ground on yet another facility this week, drawing in U.S. Secretary of Commerce Howard Lutnick for the ceremony.

You’d be hard-pressed to find a bigger investment than the $165 billion that TSMC has planned for facilities in Arizona and the rest of the country.

Their first factory in Phoenix started making advanced chips last year, and they’re planning to open two more factories in the next few years to make even smaller, more powerful chips.

The benefits for Arizonans aren’t just national pride. These factories will create about 6,000 high-paying tech jobs and over 40,000 construction and supplier jobs.

And it’s not just TSMC. Other tech companies also are investing big in Arizona. Intel is spending billions to expand its chip factories in Chandler, creating thousands of jobs. And Amkor is building a $2 billion facility in Peoria to package chips to support TSMC’s production.

All of that could be up in the air if China takes the lead in the trans-Pacific tug-of-war.

To get a grip on what could be coming up for Arizona’s tech industry, let’s take a quick look at what’s been happening lately.

A bit of history

Remember when everybody was freaking out about a lack of computer chips during the pandemic?

Production slowed to a crawl as factories shut down, just as demand spiked because we were all working from home (not to mention the crypto mining craze and auto manufacturer miscalculation).

That wasn’t just a rough couple of weeks for the doomscrollers among us. Officials at the highest levels of the U.S. government were freaking out, too.

So they started cracking down on China’s ability to develop computer chips.

Back in 2022, U.S. officials blocked one of the biggest AI companies in the world, Nvidia, from selling its best chips to China. The worry was that those chips could help China build advanced weapons systems.

U.S. officials haven’t gotten over that worry. They tightened those rules in 2023. And again in 2024. And then in 2025.

Last year, U.S. officials also pushed to limit the sale of chips around the world, which was meant to block China from buying them from other countries.

The Trump administration appears to be picking up where the Biden administration left off.

Last month, Trump officials waded into the waters of high-tech regulation by adding more restrictions on the AI chips Nvidia could sell to China.

That move cost Nvidia billions of dollars in sales, but U.S. officials said it was needed to “safeguard our national and economic security.”

China tries to catch up

China wasn’t just twiddling their thumbs through all of this.

They’ve been trying to build their own computer chips so they wouldn’t have to rely on the U.S.

Two years ago, SMIC, the Chinese chip company, made waves when it made chips for Huawei’s new phone, for example.

Which brings us to SMIC’s announcement last week that they could make powerful chips for AI and servers.

They did it by using older manufacturing machines, which allowed them to get around the U.S. ban on specialized equipment.

And they have the financial backing of the Chinese government.

Just like the U.S. poured $50 billion into chip-making with the CHIPS Act in 2022 — including a $6.6 billion boost for TSMC and $8 billion for Intel —the Chinese government is investing heavily in their country’s tech industry.

That investment led to Chinese companies testing their own advanced chips, like the ones the U.S. restricts, earlier this year.

Chinese officials say they want to produce world-class chips on their own by next year.

If they do, Arizona’s place in the global chip industry could start to shrink.

The AI cake

The chips we’ve been talking about are just one part of the AI industry that allows you to use the chatbots and apps that are now a part of daily life.

Describing how each part of the AI industry fits together would require a technical manual, so we like to think of it as a layer cake, with each layer relying on the one below it.

Right now, the U.S. dominates the top layers of the cake: Consumer apps, data centers and computer hardware production.

Taiwan’s TSMC and the Netherlands’ ASML make the most advanced chips — and they’re allies of the U.S.

But that foundational base layer of minerals that need to be mined? That’s China’s domain.

And just as the U.S. is tightening up China’s access to the top of the cake, China is tightening export rules around key minerals like gallium, which are necessary to make chips.

If China starts controlling more of the base of the AI cake, then America’s lead — and Arizona’s role in the AI race — starts to look a lot less secure.

We’ll just have to wait and see how all this shakes out.

In the meantime, why not subscribe to the only newsletter in Arizona that’s going to keep you up to date on this trans-Pacific tug-of-war?

Getting a foothold: For the first time, the University of Arizona has a chief AI and data science officer, the school said in a news release. David Ebert will be the “strategic architect for the university’s AI and data science vision.” His hiring was made possible by a $3.5 million gift from an anonymous donor, which established an endowed position.

How may I direct your call?: The Phoenix Police Department is about to use AI to help answer non-emergency 911 calls, KTAR’s Serena O’Sullivan reports. The AI program, CallTriage, will help deal with the high volume of calls, police say, and direct callers to resources like online reporting or a dispatcher if needed.

White House backing: President Donald Trump is hopping on the AI bandwagon. He issued an executive order last week to integrate AI into education and provide comprehensive AI training for educators, as well as “fostering early exposure to AI concepts and technology to develop an AI-ready workforce.”

Changing times: Environmental journalists at a recent conference in Tempe said they were concerned about AI making it harder for them to convey the complexities of science news, partly because AI can pump out so much human-sounding news that readers have a hard time figuring out whether a human wrote it, as Serenity Reynolds reported for the Republic. Meanwhile, panelists at an Arizona State University law school conference discussed how they should adapt to AI in the criminal justice system. While prosecutors see AI as a key tool for analyzing datasets and spotting criminal patterns, defense lawyers could challenge the integrity of any evidence generated by AI.

Up on the stage: The Arizona Opera leaned into AI earlier this month for the first time, the Arizona Daily Star’s Cathalena Burch reported. They played an AI-generated full-length film on a screen while vocalists and a choir performed Verdi’s “Aida” at the Linda Ronstadt Music Hall in Tucson. Like most new developments in AI, there were some hiccups along the way. Movie director James Cameron probably will have better luck (huge amounts of money can do that for you) as he embraces AI in his future blockbusters.

ALS patient types via Neuralink brain implant — The third Neuralink human-trial participant — and first non-verbal ALS user — tweeted directly through the device’s brain-computer interface.

Particle-armored liquid robot from Seoul University — Researchers unveiled a shapeshifting droplet robot that rolls, splits, and ferries cargo thanks to a rigid-particle coating.

DeepMind simulates fruit-fly in MuJoCo — New MuJoCo update models fluid forces on wings and “sticky-foot” adhesion, letting an ANN-controlled digital fruit fly walk, hover, and land with insect-level realism.

Toyota × Waymo team up on personal AVs — Pre-deal aims to fuse Waymo Driver with Toyota’s vehicle platforms to create an autonomous system for future privately owned cars, expanding beyond ride-hailing fleets.