TSMC, the world’s largest maker of advanced computer chips, is upgrading and expanding a new factory in Arizona that promises to help the United States move toward a more self-reliant technology future.
But to some at the company, the $40 billion project was something else: a bad business decision.
Internal misgivings at the Taiwanese chipmaker over its U.S. factories are growing, according to interviews with 11 TSMC employees who spoke on condition of anonymity because they were not authorized to speak publicly. Many employees said the project could distract from the R&D focus that has long helped TSMC outmaneuver rivals. Some added that they were hesitant to move to the U.S. due to potential culture clashes.
Their concerns underscore TSMC’s tricky situation. As the largest maker of chips that power everything from cellphones to cars to missiles, the company has strategic importance and coveted know-how. But caught in a deepening struggle over technology leadership between the U.S. and China, TSMC tried to hedge its bets — only to find its actions were creating new tensions.
Its factory expansion in the northern suburbs of Phoenix aims to bring advanced microchip production closer to the United States and away from any potential standoff with China. Yet the effort has sparked internal apprehension, with high costs and management challenges showing just how difficult it is to transplant one of the most complex manufacturing processes known to man halfway around the world.
The pressure on the Arizona plant to succeed is enormous. Failure would mean a setback for America’s efforts to foster the advanced chip manufacturing that shifted largely to Asia decades ago. TSMC could spend billions building a factory that can’t produce enough viable chips to make it worth the effort.
“From a business perspective, TSMC’s investment in the U.S. makes no sense,” said Kirk Yang, chairman of private equity firm Kirkland Capital and a former tech analyst, citing the high cost. He added that TSMC may be forced to build a factory in the U.S. due to political considerations, but “so far, the Phoenix project has provided little benefit to TSMC or Taiwan.”
The Arizona project is TSMC’s first major concession to growing global concerns in recent years about the geopolitics of chip production, in part over concerns about China’s hostile posture toward Taiwan and chip shortages.
The chip giant, which has long had almost all of its factories in Taiwan, is now also building factories in Japan. European policymakers have rolled out plans to lure TSMC to build a plant and the company is in the final stages of making a decision on the plant, two people familiar with the matter said.
TSMC spokeswoman Nina Kao did not directly address internal concerns about the Arizona investment. But in an email, she said the decision to locate the U.S. factory was based on a combination of factors, including customer demand, market opportunity and the opportunity to tap global talent.
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Ms. Gao added that TSMC is stepping up training to integrate overseas talents into its corporate culture. The company will “actively listen and offer changes if needed,” she said.
TSMC announced its Arizona plant in May 2020, initially committing to invest $12 billion in it. In December, the company boosted its investment to $40 billion, with plans to upgrade factories with more advanced — but not state-of-the-art — chipmaking technology. The factory is expected to start producing microchips in 2024, and the company said it will add a second factory at the site later.
This project is challenging. On an earnings call last month, TSMC said construction costs in the U.S. could be at least four times those in Taiwan, driven by labor costs, permits, compliance and inflation. TSMC Chief Financial Officer Wendell Huang said the U.S. investment could hurt TSMC’s profitability this year.
“TSMC recognizes that there is a cost gap between Taiwanese fabs and overseas fabs,” said Gao, using the short form of fab or factory. The company still expects strong long-term gross margins, she added.
TSMC also needs nearby suppliers to provide raw materials, equipment and key components for the Arizona plant. However, some suppliers trying to join there said they encountered labor challenges and high costs.
Calvin Su, president of Chang Chun Arizona, a chemical supplier that invested $300 million in a factory in Casa Grande, Ariz., about an hour outside of Phoenix, said its construction cost was 10 times that of Taiwan. times. Costs were driven up by unfamiliarity with U.S. regulations and building permits, as well as a lack of supplies of production materials, he said.
Michael Yang, chairman of CTCI Corporation, the Taiwanese chip giant’s engineering and construction contractor, said construction costs for the Arizona plant “far exceeded” his client’s expectations. In addition to rising inflation, the chipmaker is competing with Intel — which is also expanding in Arizona — for skilled labor and construction equipment, he said.
“When we first reported our offer, the client replied: ‘Are you crazy?’ But that’s the way it is,” Mr Young said.
Some TSMC engineers said they were concerned about how the Arizona plant would integrate American and Taiwanese workers. In Taiwan, they say, engineers work long hours and shifts on weekends, joking that they “sell their livers” to work for chipmakers. Such sacrifices may appeal less to U.S. workers, they said.
Wayne Chiu, an engineer who left TSMC last year, said he considered joining the company’s overseas expansion plans but lost interest after realizing he might have to fill vacancies with U.S. employees.
“The most difficult thing about wafer fabrication is not the technology,” he said. “The hardest thing is managing people. Americans are the worst at it because Americans are the hardest to manage.”
Three TSMC employees who train U.S. engineers said practices among them are difficult to standardize. While the Taiwanese workers did what they were told without question, the American employees challenged their managers to ask whether there was a better way, they said.
An engineer at TSMC in Arizona said some Americans do not perform well when multitasked, sometimes rejecting new assignments rather than working harder to complete them all. Eight employees said Taiwanese workers believed that those working in Phoenix would have greater responsibilities than their American colleagues.
TSMC’s first U.S. investment more than 20 years ago also has warning significance.
In the late 1990s, company founder Zhongmou Chang pursued an ambitious overseas expansion plan and created WaferTech, a chip-making subsidiary in Washington state.Despite promising to build multiple factories there, Mr Zhang stopped after “a series of ugly surprises”, including high costs and a shortage of skilled labor, he said in a statement. podcast Last year with the Brookings Institution.
Zhang questioned U.S. efforts to reshape the global semiconductor supply chain, in a public forum In 2021, TSMC’s successful Taiwan advantage cannot be replicated in the United States.
On the Brookings Institution podcast, he also pointed out that the $52 billion in subsidies designated by the U.S. government under the CHIPS Act, a federal funding program designed to stimulate domestic production of advanced chips, is not enough to boost the industry. He calls it an “expensive exercise in futility.”
But when TSMC announced the expansion of its Phoenix plant in December last year, Mr Zhang seemed to change his mind. This time around, the company was “more prepared,” he said.
In an email to The New York Times, Zhang said he stands by what he said on a podcast last year and at an event in Arizona in December. He declined to comment further.
