Shulou(Shulou.com)11/24 Report--

TSMC, the world's largest maker of advanced computer chips, is upgrading and expanding a new plant in Arizona that is expected to help the US move towards a more independent technology future.

TSMC builds plants in the United States, however, for some inside TSMC, the $40 billion (275.8 billion yuan) investment is a different story: a bad business decision.

There are growing doubts about US factories within the Taiwanese chipmaker, according to interviews with 11 TSMC employees by foreign media. Many employees say the project may distract the company from research and development. It is this R & D-focused spirit that has long helped TSMC defeat its competitors. Some also say they are hesitant to move to the United States because there may be cultural clashes.

Their concerns highlight the thorny situation in which SMC is introduced. As the world's largest contract manufacturer of chips, TSMC's chips drive everything from mobile phones to cars. The company is of strategic importance and has acquired coveted know-how. In the face of the geographical situation, TSMC tried to hedge the risk, only to find that its actions were creating new tensions.

TSMC has expanded its plant in the northern suburb of Phoenix, Arizona, to bring advanced microchip production closer to that of the United States. However, the effort has raised concerns within the company, and the high costs and management challenges show how difficult it is to migrate one of the most complex manufacturing processes known to mankind to the other side of the world.

Unjustifiable investment in TSMC's Arizona plant is under great pressure to succeed. If it fails, it would mean a setback in US efforts to nurture advanced chip manufacturing, which mostly moved to Asia decades ago. At the same time, if the Arizona plant cannot produce enough available chips, it proves that TSMC's billions of dollars of investment is not worth it.

"from a business point of view, TSMC's investment in the United States makes no sense." Kirk Yang, chairman of private equity firm Kirkland Capital and former technology analyst, said he mentioned high costs. He added that TSMC may have been forced to build a plant in the US out of political considerations, but "so far, the Phoenix project has brought little benefit to TSMC or Taiwan". The project is TSMC's first major concession to global concerns about the geography of chip production in recent years.

For a long time, TSMC has left almost all its factories in Taiwan. Now, the company is also building factories in Japan. European policymakers have come up with plans to attract TSMC to build a plant, according to two people familiar with the matter. At present, TSMC is in the final stage of making a decision on the construction of the plant.

Nina Kao, a spokeswoman for TSMC, did not directly respond to internal concerns about the Arizona investment, but said in an email that the decision to build a plant in the US was based on a number of factors, including customer demand, market opportunities and opportunities to tap global talent.

High cost in May 2020, TSMC announced the construction of a plant in Arizona, with an initial commitment of $12 billion. In December, the company increased its investment to $40 billion and plans to upgrade its plant with more advanced chip manufacturing technology, though not the most advanced. The plant is expected to start producing microchips in 2024. TSMC said it would then add a second factory at the site.

This investment project is quite challenging. TSMC said in an earnings call last month that construction costs in the United States are likely to be at least four times that of Taiwan due to factors such as labor costs, licensing, regulatory compliance and inflation. Huang Renzhao (Wendell Huang), CFO of TSMC, said US investment could hurt TSMC's profitability this year.

TSMC increases US factory investment to US $40 billion. "TSMC recognizes that there is a cost gap between Taiwan's wafer factories and overseas wafer factories." TSMC spokesman Gao Menghua said. She added that the company still expects long-term gross margins to remain robust.

TSMC also needs nearby suppliers to provide raw materials, equipment and key components for the Arizona plant. However, some suppliers who are trying to join say they face labour challenges and high costs.

Taiwan's Changchun Petrochemical has invested in a $300 million plant in Casa Grande, Arizona, about an hour's drive from Phoenix. Su Yuhong, manager of Changchun Sinopec Arizona, said that the cost of building a factory here is 10 times that of Taiwan. According to him, unfamiliarity with US regulations and building permits, as well as insufficient supply of production materials, are all reasons for the rise in costs.

Michael Yang, chairman of Zhongding Engineering, an engineering and construction contractor for TSMC, said the cost of building the Arizona plant "far exceeded" his customers' expectations. In addition to rising inflation, TSMC is also competing with Intel for skilled labor and construction equipment, he said. Intel is also expanding in Arizona.

"when we first reported the offer, the customer's reaction was: 'are you crazy?' but that's what happened." Yang Zongxing said.

It is most difficult for Americans to manage some TSMC engineers who say they are worried about how the Arizona factory will integrate American and Taiwanese workers. They say that in Taiwan, engineers work long hours and work shifts on weekends, and joke that they are "selling their liver" to work for TSMC. But they argue that such sacrifices may be less attractive to American workers.

Wayne Chiu, an engineer who left TSMC last year, said he had considered joining TSMC's overseas expansion plans, but lost interest after realising he might have to clean up the US mess.

"the most difficult thing about wafer manufacturing is not technology," he said. "the most difficult thing is personnel management. Americans are the worst at this, because Americans are the most difficult to manage."

Chips made from wafers three TSMC employees who have trained US engineers say it is difficult to standardise practices among US employees. They say Taiwanese employees will no doubt follow the requirements, while American employees will question managers and question whether there is a better way.

An engineer at TSMC in Arizona says some Americans seem reluctant to be assigned multiple tasks, sometimes rejecting a new task rather than working harder on each one. Eight TSMC employees said they thought people who worked in Phoenix would bear more responsibility than their American colleagues.

Zhang Zhongmou's lesson more than 20 years ago, TSMC's first investment in the United States also served as a warning. In the late 1990s, TSMC founder Morris Chang promoted an ambitious overseas expansion plan and set up WaferTech, a chip manufacturing subsidiary in Washington State.

Zhang Zhongmou revealed on the Brookings Institution podcast last year that although he had promised to build a number of factories in the United States, he had built only one factory after "a series of embarrassing accidents." These accidents include high costs and a shortage of skilled labour.

Zhang Zhongmou also questioned US efforts to reshape the global semiconductor supply chain. The Taiwan advantage behind TSMC's success cannot be replicated in the United States, he said at a public forum in 2021.

Zhang Zhongmou pointed out in a podcast program at the Brookings Institution that the US government's $52 billion subsidy under the Chip Act was not enough to start the chip manufacturing industry and was an "expensive and futile move." The Chip Act is a federal funding program designed to stimulate advanced chip production in the United States.

But when TSMC announced the expansion of its Phoenix plant in December, Mr Zhang seemed to change his mind. This time, he says, the company is "much better prepared".

When asked about the statement, Zhang Zhongmou responded that he insisted on his comments on last year's podcast and events in Arizona last December, but declined to comment further.

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.