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TSMC Faces Challenges in Building New Semiconductor Plant in Arizona – Lessons on U.S. FDI Attraction


As a pioneering “giant” in semiconductor manufacturing, supplying nearly 90% of semiconductor products to global technology companies, Taiwan Semiconductor Manufacturing Company (TSMC) is expanding its “empire” worldwide. However, TSMC encounters unexpected challenges in executing its plan to build a new semiconductor plant in Arizona, USA.

TSMC faces prolonged delays in the construction of semiconductor plants in Arizona.

Investing over $40 billion in infrastructure for two semiconductor plants in Phoenix, Arizona, TSMC aims to broaden its influence in the global semiconductor arena. However, the company’s “American dream” faces numerous challenges in project implementation, ranging from negotiations with labor unions to managing foreign personnel.

Criticisms and challenges of bringing foreign specialized personnel in the U.S.

semiconductor plant

Source: The American Prospect

Addressing labor controversies, during the Q2/ 2023 financial revenue report, TSMC’s Chairman, Mark Liu, acknowledged difficulties in finding skilled workers to install advanced semiconductor machine in their plant. Faced with a shortage of skilled labor in the U.S., the company applied for visas in June 2023, bringing in 500 experts from Taiwan to Arizona to assist in construction and installation, with a view to keep the Arizona semiconductor plant construction on schedule. TSMC’s statements and actions quickly drew harsh criticism from Arizona labor unions, who argued that this would directly contradict one of the main purposes of the CHIPS Act – creating domestic employment and strengthening semiconductor capabilities.

Agreement with the Arizona Labor Union

In response to the criticism, the Taiwan-based semiconductor “giant” clarified that hiring foreign labor was a temporary measure, and the company remained committed to localizing its supply chain in the U.S. Additionally, TSMC reached an agreement with the Arizona Commerce Authority to ensure compliance with the CHIPS Act and develop a workforce strategy for the future. The agreement includes:

  • Prioritizing domestic hiring, along with additional recruitment of foreign experts to address skill shortages.
  • Developing and implementing workforce training programs.
  • Enhancing transparent safety measures at the construction site.

semiconductor plant

(Source: abc 15 Arizona)

It is evident that, apart from the shortage of skilled labor, companies investing in semiconductor plant construction in the U.S. face other challenges such as high construction costs and restricted operations in China. Moreover, issues related to labor safety, training enhancement, local workforce development, coupled with the need to bring in foreign personnel to ensure construction progress, have placed a significant burden on TSMC. As a results, it delayed the operational launch of the two semiconductor plants in Arizona.

U.S. “trails behind” Japan in FDI attraction for semiconductor plants construction

Both the U.S. and Japan are focusing on attracting foreign semiconductor companies to expand domestic chip production. However, based on TSMC’s deployment and construction progress, the U.S. has shown significant limitations in attracting foreign investment.

semiconductor plant

Regarding relations in labor, TSMC faces pressure from various laws, policies and high benefit guarantees for personnel from U.S. labor unions, resulting in additional costs for training and employing local workers. While, in contrast, such issues are less common in Japan.

In terms of the semiconductor ecosystem, while TSMC struggles in Arizona, the company receives support from the “ecosystem” of Japanese companies that hold stakes in TSMC’s subsidiaries, such as Sony and Toyota. This support not only provides financial assistance and local operational experience but also positions TSMC as a high potential domestic supplier for these key customers.

When it comes to regulations and subsidies, both Japan and the U.S. allocate substantial subsidies for semiconductor businesses. However, the slow pace of disbursement is eroding the U.S.’s competitive edge. TSMC received half of the construction costs as a subsidy for the semiconductor plant project in Kumamoto, Japan, and swiftly implemented the project. However, in was not the case of the U.S., the company has yet to receive any subsidies since the CHIPS Act in 2022.

For now, TSMC states that the first semiconductor plant in Arizona will commence operations in 2025, instead of the initially planned mid-2024. SImilarly, the second plant’s operational timeline is also delayed, moving from 2026 to 2027 or even 2028. The slow disbursement not only affects the construction schedule but also raises construction costs as the prolonged delay continues.

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