The exodus from silicon valley started to AZ and NM. There is existing talent there with process engineers and technicians. Probably their universities have good eng programs.
Defense and aerospace contractors are big in AZ too.
Yes, but there’s not really enough to keep ahead of foreign competition in many cases. Lots of those engineers are older and not necessarily as creative as they formerly were.
Go look at the in house competition between Intel design departments that resulted in the Core-i line of processors. The US department designs were clearly inferior in each round of competition until Intel gave up and just let their Israeli studio deal with it. Also see what happened to Motorola/Freescale towards the end of their PowerPC production - same basic kind of thing, no new blood and the old engineers wouldn’t get radical.
Case in point: https://www.jpost.com/israel-news/made-in-israel-intel-launches-most-powerful-processor-yet-587698