TSMC Delays Arizona Factory Opening Due to Insufficient Skilled Local Talent

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) logo brands the headquarters in Hsinchu, Taiwan, on Oct. 20, 2021. Chiang Ying-ying/AP Photo

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest chipmaker, will delay production at its new Arizona chip plant to 2025 due to a shortage of skilled labor.

The year-long delay comes as trade relations between Washington and Beijing, have deteriorated over the past several years.

TSMC Chairman Mark Liu broke the news to investors on a second-quarter earnings call on July 21.

Mr. Liu said that the company does not have enough skilled local workers to install advanced equipment at its new facility, in time for the official deadline.

TSMC first proposed plans to build the facility in Arizona in 2020, when former President Donald Trump was in office.

The Taiwanese company said last fall, that it would begin making its new 5-nanometer chips at the Arizona facility by 2024,

Mr. Liu had hoped that the first of TSMC’s two semiconductor production facilities at the Arizona plant would be operational by 2024, with the second coming online by 2026.

TSMC is the primary manufacturer of chips for Apple’s iPhones and its CEO Tim Cook has plans to buy computer chips from the plant.

Apple’s next processor for the iPhone is allegedly based on the company’s 3-nanometer process technology.

The American phone maker typically releases its latest iPhone in September and is likely ordering chips from TSMC in the third quarter.

Plan to Bring Chip Production Home to America Faces Delays

Semiconductor chips are essential to everything, from cars and computers to mobile phones.

The United States has been attempting since the Trump administration, to bring semiconductor manufacturing back home, after depending on chip imports from East Asia for decades.

In 1990, the United States once accounted for almost 40 percent of the global production of computer chips, but it now produces around 10 percent of the global supply.

The vulnerability of America’s extended supply chain across the Pacific, for vital computer chips, has become a national security risk.

Fear of China’s growing chipmaking industry has led Washington to impose a series of measures against Beijing while investing billions of dollars to boost America’s semiconductor industry.

The pandemic highlighted the vulnerability of American dependence on computer chips from countries like Taiwan, which is increasingly vulnerable to attack from China.

Biden administration passed the CHIPS and Science Act last summer, which will provide $280 billion to bring more domestic chip development and manufacturing back home and “create good-paying American jobs.”

The investment included tax breaks for foreign companies that built computer chip manufacturing plants in the United States.

Last December, TSMC told the Biden administration that it would more than triple its investment in the project to $40 billion, making it one of the largest foreign investments in American history.

The Wall Street Journal reported that the company initially applied for $15 billion in funding under the CHIPS act.

Taiwanese Chip Maker to Build Chips in the US

TSMC told the Biden administration that they would fulfill the conditions set by the act by creating more than 1,600 high-tech professional jobs and “thousands of indirect jobs in the semiconductor ecosystem.”

However, Mr. Liu said that the plant, which had been under construction since April 2021, now faced a shortage of workers with the specialized “expertise required for equipment installation in a semiconductor-grade facility.”

The TSMC Chairman added that the tech firm was “working to improve the situation, including sending experienced technicians from Taiwan to train the local skilled workers [in the United States] for a short period of time.”

The company confirmed to Reuters in late June that it was working to send technicians from Taiwan to train local workers and help accelerate the launch, to ensure a “fast ramp up” of its factory.

“The additional number who will be going has yet to be determined” and Taiwanese workers “will only be in the state for a limited time,” the company said.

ASML Holding NV CEO Peter Wennink told Bloomberg that the delay was not really unexpected because of the challenge of getting access to skilled workers to build the semiconductor fabrication plants.

“People don’t seem to realize that when we start building those fabs across the globe now and are everywhere, that skill has been refined over the last couple of decades in only a few places on the planet—predominantly in Taiwan and in Korea and a bit in China,” said Mr. Wennink.

“Getting access to the requisite skills and skilled workers to keep the construction plan on time is a challenge,” he said.

TSMC Faces Local Union Dispute

The addition of non-American workers has now begun to upset labor unions and their advocates.

On July 19, the left-wing publication, The American Prospect, reported some tension between American and Taiwanese workers, after the pay of some local workers was cut.

Union electricians represented by IBEW 60, told the magazine, that members at the Arizona construction site felt “double-crossed,” after TSMC sent in more than 500 workers from Taiwan.

TSMC has been accused of attempting to cut costs by sending in more workers from Taiwan, while it has not disclosed exactly how many have arrived or how many more may be coming.

Union representatives said they were concerned that TSMC was attempting to replace them with overseas workers by eliminating union electricians’ incentive pay earlier this month, causing 50 American workers to quit.

TSMC said that bringing in skilled workers from Taiwan “will not impact the 12,000 workers currently on-site every day or U.S.-based hiring” and that more advanced training will be needed before Americans could replace them.

To mollify the workers, TSMC reinstated the incentive pay, but again inflamed tensions, after it offered a union contractor “25 non-union employees recruited from Taiwan to help solve their new labor shortage,” the IBEW told The American Prospect.

The union contractor said that they would not hire the non-union workers, since they “only use workers dispatched from the union hall” and that TSMC would also have a hard time recruiting American workers unless the company raised wages.

The Epoch Times reached out to TSMC for comment.

Chip Giant Hit With Losses in Second Quarter

TSMC further forecast a 10 percent drop in sales this year, because of slower demand for semiconductors, while shares closed more than 3 percent lower in Taiwan after news of the production delay broke.

After global demand for laptops and smartphones spiked during pandemic-era lockdowns, smartphone and computer makers started to stockpile chips.

The industry is now dealing with excess inventories, as consumers cut back on electronics, due to rising inflation, which led the price of chips to plunge.

Meanwhile, Apple, TSMC’s largest customer reported that overall sales fell for the second quarter in a row in May.

The chipmaker announced that profits fell by around 23 percent to $5.8 billion in the second quarter to $15.68 billion in revenue versus $15.28 billion expected, compared to the same period in 2022.

This is TSMC’s first quarterly net income decline since the second quarter of 2019, but the company forecasts third-quarter revenue between $16.7 billion and $17.5 billion.

“Moving into third quarter 2023, we expect our business to be supported by the strong ramp of our 3-nanomenter technologies, partially offset by customers’ continued inventory adjustment,” said Wendell Huang, CFO of TSMC.

Reuters contributed to this report.