Manufacturing, which has grown rapidly since World War II (1939–45), became the state's leading economic activity in the 1970s. Factors contributing to this growth included a favorable tax structure, available labor, plentiful electric power, and low land costs. The major manufacturing centers are the Phoenix and Tucson areas. Principal industries include nonelectrical machinery, electrical and electronic equipment (computers, semiconductors, communication equipment), aircraft equipment, food products, and printing and publishing. Military equipment accounts for much of the output. The total value added by manufacturing in 1997 amounted to an estimated $44 billion. Principal manufacturers of electronic and technology-intensive equipment in Arizona include: Motorola, Allied Signal Aerospace, Honeywell, Hughes Missile Systems Co., and Intel. Intel expanded its operations in Arizona with the construction of a $1.3 billion plant in 1994. While high-tech manufacturing actually declined in Arizona in 1998 and early 1999 in part because of the Asian financial crisis, the 62% of the state's low-tech manufacturing improved. The manufacturing and construction employment growth rates shrank from 1994 to 1999.

Earnings of persons employed in Arizona increased from $72 billion in 1997 to $79 billion in 1998, an increase of 10%. The largest industries in 1998 were services, 28.9% of earnings; state and local government, 11.2%; and durable goods manufacturing, 11.2%. Of the industries that accounted for at least 5% of earnings in 1998, the slowest growing from 1997 to 1998 was state and local government, which increased 4.9%; the fastest was wholesale trade (6.4% of earnings in 1998), which increased 11.8%.