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The Rise of the Silicon Desert
7 Plays7 days ago
Arizona is no longer a hidden tech hub—it’s becoming a global force in semiconductors, AI, energy, and space.
In this episode of the Voice of Growth Podcast, Manny Teran sits down with Steve Zylstra, CEO of the Arizona Technology Council, to break down what’s really driving Arizona’s rise—and what could stop it. From the arrival of TSMC and the expansion of companies like Intel and Nvidia, to the deeper infrastructure challenges around energy, water, workforce, and housing, this conversation reveals the truth behind exponential regional growth.
Steve shares why Arizona’s success is the result of decades of intentional policy and leadership, why the next wave of opportunity will belong to entrepreneurs who solve constraint-driven problems, and what it will take for Arizona to compete with Silicon Valley, Austin, and beyond.
If you want to understand where the next major opportunities are forming—and how to position yourself ahead of them—this episode is essential.
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Transcript
The Myth of Overnight Success and Growth Challenges
00:00:04
Speaker
The voice of growth, mastering the mind and market.
00:00:09
Speaker
A lot of people think all this success just happened overnight. If we can solve the challenges that we have, ah that will clear the way for the kind of exponential growth that you're talking about.
Energy's Role in Tech Advancement
00:00:23
Speaker
The most concerning issue energy. The research they do is absolutely essential in supporting the tech industry.
00:00:36
Speaker
Two of the most powerful research universities in the United States. We should be a national leader in clean energy.
Key Factors in Arizona's Success
00:00:46
Speaker
Start early when you're in college to form your your enterprise.
00:00:52
Speaker
You know, I think this is the place right now for all of those reasons and it's why we're being so successful. As a leader, one of your most important jobs besides setting the vision of the organization and the direction of the organization is to support your team with the resources they need to succeed at what they do.
00:01:15
Speaker
TSMC, of course, changes the equation.
Arizona's Rise as a Tech Hub
00:01:21
Speaker
Arizona has quietly become this technology hub that encompasses aerospace, semiconductor, defense, AI, all these things come together. In your opinion, what has been the inflection point that's caused these things to come to pass?
00:01:40
Speaker
Well, I think it's been many, many years of working on developing the kind of business climate that's attractive to these kinds of companies. um We've, over the years, and the Tech Council's been heavily involved in that, lowered corporate taxes.
00:01:56
Speaker
created the best research and development tax credit in the nation, ah created a um refundable R&D tax credit for earlier stage companies, and an angel investment tax credit, just to name a few.
Phoenix's Growth and Contributing Factors
00:02:12
Speaker
You know, um we have available land, Most major cities in the United States don't. right We're now the fifth largest city in America here in Phoenix.
00:02:24
Speaker
um We have ah low taxes. I just mentioned the corporate taxes, but for individuals, so we have low taxes, property. Sales tax is a little higher than places.
00:02:35
Speaker
But um I just think it's the it's the business climate It's the climate in general. People love to move here and and live here. And ah we have modestly priced power.
00:02:49
Speaker
You know, large manufacturers use a massive amount of power. power um So the conditions have been right. And then i think we've got some extraordinary economic development organizations, particularly the Arizona Commerce Authority.
00:03:04
Speaker
But in Tucson now, the Chambers of Southern Arizona, used to be Sun Corridor, and here in Phoenix, Greater Phoenix Economic Council. And all of them have played a remarkable role in educating people from around the world about the assets that this place has that makes it attractive for locating, particularly advanced manufacturing.
00:03:27
Speaker
Yeah. One of the things that I find interesting about some of these new things happening with semiconductor in particular, people forget that Motorola started here long time ago.
Arizona's Future Tech Identity
00:03:39
Speaker
So if you look at the the bigger backdrop of all these big trends at play, AI, the gig economy, all the things happening with um data centers, what do you see as the identity for Arizona for the next 25, 50 years?
00:03:57
Speaker
fifty years So first of all, to the history you just mentioned, Motorola actually put an R&D center here in 1949. The be Galvin brothers brought Motorola here.
00:04:09
Speaker
within Within two or three years, they built a manufacturing facility. And within a number of years, they had 22,000 to 25,000 employees.
Semiconductor Industry Evolution in Arizona
00:04:18
Speaker
crazy. So that was the beginning of the semiconductor industry. And then in 1979, 1980, Intel came.
00:04:26
Speaker
Today, they employ about 10,000 people here in the in the Phoenix area. But we have on-semi, microchip, micro-semi, ASML, AMS. this has long been a semiconductor region.
00:04:42
Speaker
TSMC, of course, changes the equation. Yeah, it does. The most sophisticated a chip manufacturer on the planet now making the most sophisticated chips right here in Arizona.
00:04:55
Speaker
And that has attracted the likes of Apple and NVIDIA and other squid locations here as well. So the semiconductor industry um has long been, is one of the original technology industries. The other you mentioned earlier is aerospace and defense. Right.
00:05:12
Speaker
After World War II, of course, um we built a lot of bases here during World War II. And after the war, a lot of the prime contractors moved their locations here to be close to the customer.
00:05:25
Speaker
In addition to that, there was a, I forgot what the act was called, but after the war, um the the military decided that defense contractors should not be close to on the shore because the Japanese got close to us during the World War. So a lot of those defense contractors moved inland and Phoenix and Arizona in general was a beneficiary of that.
AI and Quantum Computing's Impact
00:05:50
Speaker
um The next 50 years, um first of all, AI, as we all know, is changing everything. It is. And it's affecting every industry in profound ways. um We're going to become much more efficient and effective at pretty much everything that we do.
00:06:10
Speaker
I think beyond AI, we're going to see probably in the next three to five years, quantum computing become more significant.
00:06:21
Speaker
And that will change everything yeah again. ah And then, um as you know, the University of Arizona is making a really hard push on fusion. And fusion is now practical, right? um That's probably at least 10 years away.
00:06:39
Speaker
um i think we're going to see a lot more um before fusion, a lot more nuclear, small modular nuclear reactors and conventional.
00:06:51
Speaker
nuclear as well. And those are all necessary to fuel a tech industry like we're creating here in Arizona.
Space Sector Growth: Yuma's Spaceport
00:07:00
Speaker
So I think the future holds lots of promise. Another industry that's um growing, i I'm proud to serve on the Arizona Space Commission, and that's another sector that's growing here in Arizona.
00:07:14
Speaker
oh Working to build a spaceport in Yuma, Arizona. So that's another industry that's going to be moving forward. Now we've talked about a lot of the positive aspects of what's happening in Arizona.
00:07:27
Speaker
And I mean, I came back to Arizona having been from Tucson and Douglas, my hometown, and i left and i went all over the place. And then I came back to raise my kids and to make my life in Arizona.
00:07:39
Speaker
What do you see as the things that we are lacking that would take us and just take us 10x? If you had a magic wand, it could pick out, you know, two or three things that you would say these three things would take us to the like the next
Workforce Challenges in Arizona's Growth
00:07:55
Speaker
level. would those be?
00:07:57
Speaker
Well, let me first talk about the challenges, because if we can solve the challenges that we have, ah that will clear the way for the kind of exponential growth that you're talking about in my view.
00:08:10
Speaker
One is workforce, right? We do pretty well in that regard. We've got three tremendous state universities. um We've got Embry-Riddle and other institutions. We've got probably one of the best community college systems in the United States.
00:08:27
Speaker
um The um Arizona Commerce Authority is running all these workforce accelerators around the around the state. And we do okay, but there's still um a lot of positions that are lacking that need to be filled in these various industries. So there's a lot of hard work going on right now to address that, but I think workforce is always going to be an issue.
00:08:53
Speaker
um water is an issue right to continue the growth and advanced manufacturing large manufacturers need water uh you mentioned data centers traditionally they need a lot of water but in both cases i think what's happening is that uh first of all if you look at intel's website they'll tell you that they actually generate more water than they consume because everything circulates and ah they actually invest in technologies that create water. right um
00:09:27
Speaker
TSMC has ah has a so similar trajectory. um And then um Data centers, um if you follow that, there's a lot of pushback on data centers right now, but and water is one of the issues. But for the most part, all new data centers are going to address the water issue with new technologies and new methodologies for cooling servers.
00:09:52
Speaker
And that's already well well underway. But water will continue to be an
Water Scarcity and Colorado River Challenges
00:09:58
Speaker
issue. we know the Colorado River situation is ah not looking very good right now. um So that's a challenge we have to overcome in order to continue to succeed.
00:10:09
Speaker
um Housing, you know, as we're attracting so many people here to Arizona, um we need more housing than the industry has built. um And then finally, probably the most concerning issue is energy.
00:10:26
Speaker
Large advanced manufacturers and data centers, particularly ai ah data data centers, consume massive amounts of energy.
00:10:37
Speaker
So these other things I talked about earlier, like nuclear and fusion and so on, have the potential to solve those issues going forward.
00:10:49
Speaker
But in the short run, I think it's going to um inhibit some growth because um they can't build... capacity fast enough right now. There's challenges in that industry, getting gas turbines and ah frankly, a nuclear is 10 years away.
00:11:07
Speaker
So um clean energy is one of the major solutions and we have 300 days
Entrepreneurial Growth and Capital Availability
00:11:12
Speaker
of sunshine. So it's a very true, great place to do that. So um I think the other thing, you know, we've come a long way in terms of our um entrepreneurial community.
00:11:24
Speaker
We have a lot more capital available. We've got a lot more support organizations and initiatives here. But, you know, we're we're not New York. We're not Silicon Valley. So we've got a long way to go in that regard because we want to produce our own because those that become unicorns invest back into the community. We see great examples of that around the country, particularly Salt Lake City, by example.
00:11:55
Speaker
What's interesting about what you said are these challenges and ah call me an optimist or call me crazy, but they're not that crazy. They're not insurmountable. there' There's a path there.
00:12:07
Speaker
And even more importantly, there is an opportunity for the right entrepreneurs to come in and just clean house. Yeah. I mean, I, I, I traveled to other places that are are much more established. You mentioned so Salt Lake city. You mentioned, um, you know, the Austin, the Boston, the New York city, all that they're so established and they're almost immovable.
00:12:27
Speaker
We're here in Arizona and Tucson and Phoenix and and the other areas. There just seems to be a different spirit. And, and the, uh, I call it the spirit of the West is still alive and well. I couldn't agree more. We have, um,
00:12:41
Speaker
flexibility, agility, um and we're able to move people in this state to focus on and solve those kinds of problems. So I share your optimism that all of these challenges will be overcome, but we do need to focus time and effort and energy and funds to solve them.
00:13:02
Speaker
Exactly. So this brings me to my next question, which is a dovetail off of that.
Leadership Qualities for Navigating Change
00:13:07
Speaker
is ah with all this change that needs to happen and with your experience having having gone through change in many corporate roles and at the helm of the tech council for so long,
00:13:20
Speaker
What are the qualities that you believe are necessary for leaders, both in government and in the academic sector and in the entrepreneurial sector?
00:13:34
Speaker
What are some common leadership skills that should be developed? Well, think one is the ability to pivot as change occurs. There is always going to be change.
00:13:48
Speaker
There's going to be change in personnel. There's going to be change in the macro economy. There's going to be change And a leader's ability to recognize what's going on and then adapt ah to the changing environment, I think, is a critical skill that all leaders need to have to be successful.
00:14:11
Speaker
I think valuing your staff. um They're the ones that you know produce the output um that allows you to succeed. i think folks senior As a leader, one of your most important jobs besides setting the vision of the organization and the direction of the organization is to support your team with the resources they need to succeed at what they do.
00:14:35
Speaker
so you know that's job one. um finding the right people is um is important you know finding the right people and putting them in the right seats within the organization to succeed is is a critical quality that i think leaders must possess um and then i mentioned agility with regard to our um our state and our economy we We individually need agility as well. Flexibility, agility are important skills that I think leaders require to, again, adapt to the changing world we all live in.
00:15:14
Speaker
That's fascinating. If we were to, um, look at some favorite leaders of you, people that you admire people that you believe are prime movers or whatever, and we were gonna have ah lunch together, the four of us, me, you, and two of your favorite leaders, who would they be and die?
00:15:33
Speaker
So, um, I like Tim cook. Um, You know, Steve Jobs handed the company over to him, right? He was sort of his number two.
00:15:45
Speaker
And he has persisted in growing the most valuable kind company in the world. I think it's worth $4 trillion or something like that now, right? Yeah.
00:15:55
Speaker
And he's been able to stay the course and maintain the culture that has made that company so innovative. And ah it's almost like a cult, right? Yeah, it is. With with Apple.
00:16:08
Speaker
um I'm part of the cult, by the way. I love all my Apple products because they all talk to one another and there's a certain feel to them. I love it. Um, you know, there, let me just talk about a ah local individual that I have great admiration for. Um, I just read his most recent book called, uh, break all the rules. Uh, and that's Jim Cantrell who runs Phantom launch, uh, down in Tucson. Um, in many, you know, he was one of the first employees that Elon hired at SpaceX and helped shape that company from the, from the get go. And in many ways,
00:16:45
Speaker
He helped create the new space industry that we're now in. And he's just a fascinating individual, fun to be around.
00:16:56
Speaker
And ah so those are a couple ah people that I think about. I think having Michelle Obama at a meeting would also be cool, right? She's... um unbelievably smart and capable. There's a lot of people who have been talking about her potentially running for president, although she's stiff-armed that over and over. But You know, having someone like that who's been at the seat of power ah in the room and extracting knowledge from them would be very interesting.
00:17:31
Speaker
ah Jim is a friend of mine as well, and he actually will be on this podcast later in the summer. Excellent. And he's he's definitely, yeah he's done a lot, and he's got a lot of stories that he does he shares in front and behind the camera, you know? Yeah, he's a storyteller for sure.
00:17:46
Speaker
Read new book if you haven't. I haven't read yet. It's really exceptional. So, uh, you mentioned the three universities a few minutes ago, of which I'm an alumni of one of those very proud wildcat, but also am, uh, still do work with, uh, with
University Contributions to the Global Economy
00:18:03
Speaker
ASU. I'm on the venture devils, um, uh, judging panel and so forth. But if you were to look at the, the pieces that have been built at these universities,
00:18:15
Speaker
where do you see them playing a role in not only Arizona's future, which is important, but the global economy as well? So first of all, they play such a fundamental role in producing the workforce, right? That we consume not here only here in Arizona, but frankly around the world. um These institutions aren't just here in Arizona. They have tentacles around the world and and collaborate with researchers around the the world. So, you know, producing um the workforce is a critical role, but particularly for the state universities, um the research they do is absolutely essential in supporting the tech industry. So as we well know, it's been few decades now since the
00:19:10
Speaker
large corporations quit investing in research and development yeah and rely, um not exclusively, but a lot on universities to do that research, all kinds of collaborations.
00:19:25
Speaker
going on. And U of A and ASU are two of the most powerful research universities in the United States. um I'm really excited about the new president and particularly the head of research and partnerships at the University of Arizona, Tomas Diaz de la Rubio. He's doing an extraordinary job, I think. um And, you know,
00:19:51
Speaker
U of A had a little hiccup there, and I think they've fully recovered from that and are now on a really, really good path forward. But, you know, the optics um program there at the University of urbanism Arizona is the number one program in the world. Yeah, it is. A lot of this technology we've already talked about today relies on optics and photonics to be successful. And we're in...
00:20:16
Speaker
a great position there. um You know, I i think um those two institutions are essential not only to Arizona's success, technology industry's success, but the nation's success.
00:20:30
Speaker
And they're um contributing in a manifest way in addressing the needs of industry and the um the public.
00:20:42
Speaker
Yeah, you have a very unique position, Steve. you are I don't know, multi-leg, you're like an octopus. You've got it one leg in university, one leg in in the government space, one leg in some nonprofits, one leg, you're kind of spread out, which gives you a very unique perspective.
00:20:59
Speaker
If you were to collect a, uh, an industry that you wish Arizona played more in, in other words, something outside of what we do now, is there something in particular you wish we did more here in in the state?
00:21:13
Speaker
Yeah, I'm really excited excited about the Arizona Space Commission because we have incredible assets here, particularly, again, at the two main universities, UA and ASU.
00:21:27
Speaker
um You know, you you can talk about OSIRIS-REx, you can talk about Psyche at ASU, OSIRIS. I know Jim Bell, who serves on the um Space Commission with me, controls a robot that's on Mars. that's crazy He drives a robot.
00:21:43
Speaker
And ah so we've got incredible assets in astronomy and astrophysics. and um But we're not leveraging that sufficiently. And um so that's one of the...
00:21:56
Speaker
um roles of the new space commission is to develop a strategy. um You know, unfortunately, ah Texas and Florida and California have big brands when it comes to space.
Arizona's Clean Energy Leadership Potential
00:22:08
Speaker
And Arizona has an opportunity to do that. So that's an area that I think we need to focus more ah energy and capability on. um You know, semiconductors are going really well. I think that's going to continue to grow.
00:22:25
Speaker
i i think um for a long time, we should be a national leader in clean energy, right? We talked earlier about the 300 days of sunshine. And, you know, that's it's so essential right now in addressing the power needs of this nation, not just here in Arizona, but of this nation. So growing the clean energy sector and then... ah We do pretty well um in the on the software side. I think we have about 800 software companies here in Arizona now. So we're doing pretty well there. um
00:23:02
Speaker
you know I think um the the future that I talked about earlier in quantum, we're behind. yeah We're behind many other states. you know One of the advantages so many other states have is they have um state legislatures that make investments in these kinds of industry sectors. yeah We're not known for doing that here in Arizona. I don't suspect that that's going to change soon. So that's a...
00:23:35
Speaker
an obstacle we have to overcome um because funding is necessary to be successful. Investing in assets that help those industries succeed and and grow is important.
00:23:48
Speaker
So again, I think we're behind in quantum. um Universities are doing a lot, but there's not much happening in them in the private sector like in Colorado and and other states. So those are a few.
00:24:03
Speaker
Yeah, you look at um like Bell Labs did so much for the industry. the yeah The semiconductor, the satellite, fax machine. I mean, so many things happened there.
00:24:15
Speaker
And i was going to ask this question, but you can put your laser sight on this. What could government do better? Like, where are we lacking in particular? You mentioned funding.
00:24:27
Speaker
Is there any other place you think government can help? So, um, a lot of political, i mean, if you want to, a lot of my members, Jim Cantrell, we could talk about would say the most important thing that government can do is to stay out of the way.
00:24:45
Speaker
Right. not over-regulate industry so that it can succeed at what it does. So I think, you know, that's always been sort of a tenant of the Tech Council light regulatory environment. And we have that here in Arizona. It's amazing.
00:25:02
Speaker
the reason um Waymo came here, right? It's the reason the self-driving car industry is a major influence here today and in Arizona. So i think that's important. I do think, you know, once the economic conditions improve here in Arizona, because we're looking at a deficit over the next couple of years, that the state should be looking at its peers around the country and looking at ways to fund the kind of innovation that grows these industries.
00:25:35
Speaker
it It hasn't been able to do much of that here and there. um Initiatives will be funded that are usually managed through the Arizona Commerce Authority that does a really great job of that. But um I think the legislature should be investing in the future.
00:25:53
Speaker
and um so that is political, but we won't get into that. Yeah. The final two questions are kind of a double barrel. They're very similar, but they're to a slightly different audience.
Guidance for Young Entrepreneurs
00:26:06
Speaker
If you were to give advice to a young entrepreneur, homegrown person here in Arizona that is maybe um in the middle of college, but has this drive and really wants to create change, what would you tell that person?
00:26:22
Speaker
Part B, which I'll get you to think as you answer part a is what would you tell a company in some other state of why they should come to Arizona?
00:26:33
Speaker
Okay. So um for the students, um first of all, as I indicated earlier, there are incredible assets now in this state to support entrepreneurs. um The Arizona Commerce Authority runs some of those. The Arizona Innovation Challenge, which actually funds early stage companies.
00:26:56
Speaker
ah They have a venture launch, which supports the companies in their, ah in their effort to be funded, to become fundable. um The, the, the,
00:27:08
Speaker
the um Venture Madness, essentially a venture capital conference that we've been doing since the ninety s is a good place for them to hang out, to see what other pitches look like, meet investors. You know, all those things are important.
00:27:24
Speaker
Every one of the universities today has programs to support entrepreneurs. As you know, at UUA, they have the McGuire School there. And um so...
00:27:37
Speaker
find those assets within the academic realm that you're in. There are people in those positions now too that are there just to support students that have an entrepreneurial ah bent. Right. um You know, start early when you're in college to form your your enterprise, right?
00:27:56
Speaker
Start thinking about applying for a small business innovation research grant, those kinds of things. So I think just um take advantage of the resources. Just last week,
00:28:08
Speaker
The Flynn Foundation did its biopreneur conference, incredibly successful. ah All kinds of entrepreneurs presenting their ideas and funders there in the room ah ah listening to those presentations and potentially investing in some of those companies. So,
00:28:27
Speaker
Just leverage the assets. um As you know, we have a bunch of angel groups here, ah Desert Angels out of Tucson, ATI, Arizona Technology Investors here in Phoenix. Even Grand Canyon University has the Canyon Angels.
00:28:43
Speaker
So you can get some early stage funding through those kinds of resources. And today we have more venture capital than we've ever had yeah before here in Arizona. and ah And the venture capital, um I'm sorry, AZVC, which is one of those was originally capitalized about 110 million or something like that, maybe 120 is raising another fund now. So yeah, just, just recently announced it. So, uh, I think we're, you know, building that environment to support entrepreneurs here in Arizona. And then on the corporate side, I'll go back to the things I mentioned earlier, available space,
00:29:25
Speaker
affordable space right whether we're talking raw land or a building if you compare us to those places you mentioned boston silicon valley denver seattle uh we're very economical um we have a low tax environment we have a light regulatory environment we have ah an incredible quality of life here in arizona i think that's why a lot of us stay here you and i I mentioned that exactly ah earlier.
00:29:56
Speaker
so um And then i can't tell you how many times companies that have moved here, I've heard them say the Arizona Commerce Authority was just incredible in supporting their efforts here.
00:30:09
Speaker
And we have the other local economic development organizations that provide that support like the Chambers of Southern Arizona and and GPEC. So you know i I think this is the place right now For all of those reasons, and it's why we're being so successful.
00:30:26
Speaker
Couldn't agree more. I do have a bonus question. Okay. And um this is ah maybe a little bit deeper
Legacy in Arizona's Tech Community
00:30:33
Speaker
you. yeah In your career, i know your birthday is coming up very soon. Happy your birthday.
00:30:41
Speaker
What do you want your legacy to be? When people look back upon the work you did, the lives you changed, the mountains you've moved, what do you want to be remembered for?
00:30:55
Speaker
Well, let me talk about the last 18 years. um And maybe even before that with the Arizona Innovation Network and the high-tech industry cluster. um A lot of people think all this success just happened overnight.
00:31:12
Speaker
It happened because of decades of people like me and many, many others focusing on the things that had to change, that had to be addressed in order to create the environment that leads to the kind of success that we're exhibiting today.
00:31:30
Speaker
you know One of the things that we do at the Arizona Tech Council um that doesn't get a lot of notoriety is our policy work at the local, state, and federal level. we're involved in every aspect of policy that affects technology companies. um So um I think...
00:31:49
Speaker
um particularly as president and CEO of the Arizona Technology Council, being recognized for the kind of support that we've provided to the science and technology industry for a few decades now is what I'd like to be remembered for.
00:32:08
Speaker
that's Thank you so much, Steve. This has been very informative, and I'm glad we were able to connect today. Thank you for having me. it was a pleasure. Cheers. Cheers.