A mix of American and Taiwanese employees at the world’s leading semiconductor manufacturer spent between 12 to 18 months in Taiwan for training on the semiconductor fabrication process.
Taiwan Semiconductor Manufacturing Co. (TSMC) in Arizona has finished its first major round of overseas training in Taiwan. 600 workers, nearly a third of TSMC Arizona’s workforce, returned to Phoenix Sky Harbor International Airport on March 7th. The group consisted of a mix of American and Taiwanese workers who spent between 12 to 18 months on the island.
TSMC Arizona CEO Rick Cassidy and Phoenix Mayor Kate Gallego were at Phoenix Sky Harbor International Airport to welcome the returning workers and families. Mayor Gallego, who, according to her Twitter bio, oversees the fifth largest and fastest growing city in the US, touted Phoenix’s “leadership in semiconductor manufacturing,” in a tweet on March 8th.
The training process in Taiwan involved both US and Taiwanese employees. Although there have been private concerns of the work ethic of American employees in relation to Taiwanese employees, Mino Morgese, a TSMC manager, said that he did not notice friction between the two groups of workers in this high-intensity industry.
TSMC recently announced that it would triple its initial investment in Arizona to $40 billion. Chris Cooper, an East-West Center alum and current Fulbright grantee, recently covered that announcement, which involved a visit from US President Joe Biden. This figure is well over three times Taiwanese Greenfield investment in the U.S. since 2003, which was at $12.2 billion from 2003-2020.
Semiconductors are required inputs for modern electronics. Advances in minimizing the size of semiconductors have generally reduced other hardware constraints. Some constraints include the battery capacity and even hardware size. TSMC is Taiwan’s premier semiconductor company, with a 55% of the global foundry market share alone. Including other firms, Taiwan’s global market share of semiconductor foundries is at 65%.
Construction of TSMC’s newest facility in Arizona took around 16 months, from March 2021 to July 2022. The facility’s current responsibility is to contribute to producing 5-nanometer chips.
A variety of factors led TSMC and other leading tech companies to consider Arizona as for their semiconductor production facilities. Luke James, a Contributing Writer from “All About Circuits” cites Arizona’s, “lower cost of living, lower personal and corporate taxes, more affordable housing, and fewer regulatory hoops,” relative to other US states, as an appealing factor. Although water use is part of the process, key incentives to choose Arizona, according to Bill Wiseman from McKinsey, included the ample availability of electricity and existing clusters of supporting services. Intel’s chip investments in Arizona in the 1980’s means that there is already an established chip ecosystem in the Grand Canyon State.
The United States leads the world in semiconductor design, but relies on Taiwanese manufacturing capacity for production. TechInsights data, cited in a CNBC report, suggests that a ‘Made in the U.S.A.’ iPhone would cost about $100 more than it normally would. The CHIPs and Science Act passed last year includes measures to blunt the impact of locating manufacturing operations in the United States. Some of these measures include $39 billion in incentives and a 25% tax credit for capital expenses. TSMC is among other firms like Intel and Samsung that are set to receive funding under the Act. That funding, however, is tied to certain conditions laid out in a fact sheet on February 28th this year.
For now, the current trend of semiconductor manufacturing in the United States reflects the lengths businesses will go to ensure stable operations in the face of economic or political externalities. These measures can comprise either the ‘onshoring’ or ‘friendshoring’ of jobs due to geopolitical risk assessments by businesses and calls for more resilient supply chains.
Whereas the word ‘onshoring’ indicates a transfer of jobs from foreign sources to domestic labor markets, ‘friendshoring’ suggests ‘rewarding’ reliable partners with outsourced jobs (and conversely, ‘punishing’ uncooperative partners).
Of course, both onshoring and friendshoring efforts will be limited by a mix of technological capabilities and geographic location (for example, with critical minerals). Semiconductor-related subsidies in the CHIPS and Science Act may lessen these constraints by reducing startup costs. Since the CHIPS and Science Act only passed into law last year, it is still uncertain whether more companies in different industries will get to cash in on their ‘geopolitical chips.’
Angelo Paule is a Spring 2023 Young Professional at the East-West Center in Washington. He received his Bachelor of Arts degree in Political Science at the University of Guam. He will begin Georgetown University’s Master of Science Foreign Service program in Fall 2023.