(Bloomberg) -- Amkor Technology plans to build a $2 billion semiconductor advanced packaging facility in Arizona, an investment that could generate as many as 2,000 jobs and bolster the Phoenix region’s status as a US chipmaking hub. 

The site, in the city of Peoria, will start production within the next two to three years, the company said in a statement. It will package chips made for Apple Inc. at a $40 billion fabrication facility that Taiwan Semiconductor Manufacturing Co. is currently building in Phoenix. 

Amkor is the biggest outsourced provider of semiconductor assembly and testing in the US, and its Peoria plant will be the largest outsourced advanced packaging facility in the country, the company said. Globally, Amkor competes against Taiwan’s ASE Technology Holdings Co. and a coterie of other Asian players, with Malaysia being the international hub for such work.

Amkor stocks were up as much as 1.2% in early trading Thursday.

The 55-acre Peoria facility is one of more than two dozen announced chip investments in Arizona over the past few years, including a massive expansion by Intel Corp. in Chandler

The state is among the top beneficiaries of the 2022 Chips Act, as companies race to take advantage of federal grants and loans worth $100 billion. With the law, President Joe Biden’s administration intends to revitalize domestic chipmaking and reduce reliance on Asian supply chains that Washington sees as a national security risk. 

Amkor has applied for Chips Act funding, the firm said in a statement, adding that federal support will be “critical to Amkor’s project moving forward.” Commerce Secretary Gina Raimondo has said her agency plans to make the first awards by the end of this year. 

The Amkor plant will help address a lack of US capacity in packaging — the “special sauce” in chipmaking, in Raimondo’s words, that is set to become the next big chips battleground between Washington and Beijing. The US houses just 3% of the world’s packaging capacity to China’s 38%.

Read More: A New Front Is Opening Up in the US-China Conflict Over Chips

“As one of the first advanced packaging facilities in the US, this is a huge step forward to reducing dependence on other countries in the microchip supply chain,” Senator Mark Kelly, an Arizona Democrat, said in a statement.

Apple and TSMC also issued statements of support, citing longstanding packaging partnerships with Amkor. 

“We share Amkor’s excitement for its significant investment and the value this facility will bring to TSMC, our customers, and the ecosystem,” said TSMC Chief Executive Officer CC Wei. 

In Taiwan, the company has been working closely with ASE to meet the soaring demand for its so-called CoWoS packaging. That’s proven a bottleneck, constraining supply of Nvidia Corp.’s class-leading artificial intelligence accelerators.

Packaging Push

The Biden administration recently outlined a $3 billion plan to stimulate the packaging industry, which focuses on technologies that outfit chips for use in everything from telephones to cars to nuclear missiles. As the transistors on chips become so small that they push the limits of physics, innovation in the semiconductor sector will increasingly focus on how those chips are put together. 

Without localized packaging, US-made chips would still have to be shipped to Asia for assembly, creating a supply-chain risk the US “just can’t accept,” Under Secretary of Commerce Laurie Locascio said earlier this month. 

Arizona Governor Katie Hobbs said in a Thursday statement that she discussed Arizona investments with Amkor during a recent trip to South Korea. South Korea’s SK Hynix Inc. has also said that it plans to invest $15 billion in a packaging facility in the US, but the company has not selected a site. 

Read More: Arizona and TSMC Talking Advanced Chip Packaging, Governor Says

“The packaging piece is a critical component to that end-to-end solution that Congress talked about wanting to have in the United States,” Chris Camacho, chief executive officer of the Greater Phoenix Economic Council, said in an interview this fall. 

Total announced private chips investment in the Grand Canyon State tops $60 billion, according to the Arizona Commerce Authority, the state’s economic development agency, which has additionally pledged $100 million to support Arizona’s semiconductor sector. 

--With assistance from Ian King and Jane Lanhee Lee.

(Updates with additional details, statements from TSMC and Apple.)

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