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Inside Taiwanese Chip Giant, a U.S. Expansion Stokes Tensions

Employee doubts are rising about Taiwan Semiconductor Manufacturing Company’s $40 billion investment in an Arizona factory.

John Liu and Paul Mozur, who are based in Seoul, interviewed dozens of semiconductor experts on the geopolitics of Taiwan’s chip making.

But to some at the company, the $40 billion project is something else: a bad business decision.

Internal doubts are mounting at the Taiwanese chip maker over its U.S. factory, according to interviews with 11 TSMC employees, who declined to be identified because they were not authorized to speak publicly. Many of the workers said the project could distract from the research and development focus that had long helped TSMC outmaneuver rivals. Some added that they were hesitant to move to the United States because of potential culture clashes.

Its factory expansion in the northern outskirts of Phoenix is meant to bring advanced microchip production closer to the United States and away from any potential standoff with China. Yet the effort has stoked internal apprehension, with high costs and managerial challenges showing how difficult it is to transplant one of the most complicated manufacturing processes known to man halfway across the world.

“TSMC’s investment in the U.S. from a business perspective makes no sense at all,” said Kirk Yang, chairman of the private equity firm Kirkland Capital and a former tech analyst, citing lofty costs. He added that TSMC might have been forced to set up a factory in the United States because of political considerations, but “so far, the Phoenix project has yielded very little benefit for TSMC or Taiwan.”

The chip giant, which has long had almost all its factories in Taiwan, is now also building a facility in Japan. European policymakers have rolled out plans to attract a TSMC factory, and the company is in the final stages of making a decision about that plant, two people with knowledge of the matter said.

Nina Kao, a TSMC spokeswoman, did not directly address the internal concerns over the Arizona investment. But in an email, she said the decision on the U.S. factory location had been based on various factors, including customer demand, market opportunity and the chance to tap global talent.

Ms. Kao added that TSMC was strengthening its training to integrate overseas talent into its corporate culture. The company will “actively listen and provide change where needed,” she said.

The project is challenging. In an earnings call last month, TSMC said the U.S. construction could be at least four times the cost in Taiwan, driven by labor expenses, permits, regulatory compliance and inflation. Wendell Huang, TSMC’s chief financial officer, said the American investment could hurt TSMC’s profitability this year.

“TSMC recognizes that there is a cost gap between fabs in Taiwan and those overseas,” Ms. Kao said, using shorthand for a fabrication plant, or factory. She added that the company still anticipated robust gross margins over the long term.

TSMC also needs suppliers close by to provide the Arizona plant with raw materials, equipment and critical parts. Yet some suppliers that are trying to join it there said they were experiencing labor challenges and high costs.

Calvin Su, the president of Chang Chun Arizona, a chemical supplier that invested in its own $300 million factory in Casa Grande, Ariz., about an hour’s drive from Phoenix, said its factory construction cost was 10 times the cost in Taiwan. The costs were fueled by an unfamiliarity with U.S. regulations and building permits, as well as an insufficient supply of production materials, he said.

“When we reported our quotation in the beginning, the client replied: ‘Are you insane?’ But that’s just the way it is,” Mr. Yang said.

Some TSMC engineers said they were concerned about how the Arizona factory would blend American and Taiwanese employees. In Taiwan, engineers work long hours and weekend shifts, joking that they “sell liver” to work for the chip manufacturer, they said. Such sacrifices may be less appealing to employees in the United States, they said.

Wayne Chiu, an engineer who left TSMC last year, said he had thought about joining the company’s overseas expansion drive but lost interest after realizing he would likely have to pick up the slack for U.S. hires.

“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.”

Three TSMC employees who trained American engineers said it was difficult to standardize practices among them. While Taiwanese workers unquestioningly follow what they are told to do, American employees challenged managers, questioning if there might be better methods, they said.

Some Americans struggled when assigned multiple tasks, sometimes rejecting a new assignment instead of working harder to complete everything, one TSMC engineer in Arizona said. Taiwanese workers believe that those who work in Phoenix will shoulder greater responsibilities than their American colleagues, eight employees said.

TSMC’s first American investment more than two decades ago has also served as a cautionary tale.

But at TSMC’s announcement of the Phoenix factory expansion in December, Mr. Chang appeared to have come around. This time, he said, the company is “far more prepared.”

In an email to The New York Times, Mr. Chang said he stood by his remarks in last year’s podcast and at the December event in Arizona. He declined to comment further.

Category: Technology

Source: NYTimes Technology

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