TSMC chip fab site in Arizona, touted last year by Joe Biden, struggles with delays and scepticism

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TSMC has pushed back production plans, blaming a lack of skilled labour in the US and calling Washington to fast-track visas for Taiwanese workers. Unions counter that the tech giant has invented the skills shortage as an excuse to hire cheaper, foreign labour.

And while TSMC does not share Biden’s love for unions, hiring mostly non-union workers through outside contractors, the company is under political pressure to negotiate with unions as Biden seeks to garner their support for his re-election campaign – pressure that has only been complicated by reports of safety issues at its first Arizona site.

Amid fraught US-China relations, concern has intensified in the US and Taiwan, where many of the world’s most advanced semiconductors are made, over the possibility of China attacking the self-ruled island over which Beijing claims sovereignty and has vowed to reunite with the mainland, by force if necessary

Taiwan produces more than 60 per cent of the world’s semiconductors and over 90 per cent of the most advanced ones, while the US accounts for only about 12 per cent of global chip output.

As the Arizona project faces operational and political challenges, analysts question whether the US will be able to emulate Taiwan’s chip success. And even if the US somehow becomes a major player in semiconductors, some wonder who would benefit most.

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Most local union members have yet to take part in the project and have only now managed to begin talks on a labour agreement with TSMC.

According to Brandi Devlin, spokeswoman for the Arizona Building and Construction Trades Council representing 14 construction unions in the state, only about a quarter of the 12,000 workers on the TSMC site are union members.

The Taiwan-based company did not sign a much-needed project labour agreement with local unions, Devlin said.

“A job [of] that size and scope requires that there be agreements in place ahead of time that address many of the issues like workforce development, staffing, safety, workers and training,” she added. “All of those get addressed in a project labour agreement.”

The TSMC factory site in Arizona, pictured in December last year, has encountered labour-related issues. Photo: Kyodo

The American Prospect, a political magazine seeking to “advance liberal and progressive goals”, reported in June that there were safety violations, worker injuries, alleged wage theft and out-of-state migrant workers at the fab site.

Luke Kasper, a sheet-metal workers union representative, was quoted as describing the fab as “easily the most unsafe site I’ve ever walked on”.

TSMC has denied these reports, saying the company was “regularly audited” against industry standards. “For TSMC Arizona, our safety and injury incident rates are significantly lower than state and national benchmarks,” a spokesperson said.

Devlin said she was aware that union and non-union workers had filed reports with Arizona’s Department of Occupational Safety and Health Administration.

Established by the US Congress in 1970, the Occupational Safety and Health Administration, also known as OSHA, enforces safe and healthy working conditions for American workers.

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“Just like any jobs, any large job site, there’s going to be issues and incidents,” Devlin said. “But I don’t know what the state of Arizona and TSMC are doing to resolve those issues, unfortunately.”

After resisting a project labour agreement for its delayed first fab, TSMC was now talking with construction unions to negotiate such a deal for its second chip facility in the state, she noted. The latter facility is estimated to commence chip production by 2026, according to a TSMC press release from December last year.

“They have been talking about some of the issues that not only union workers but non-union workers are dealing with at TSMC,” Devlin said, adding that no timeline had been established to conclude the negotiations.

Meanwhile, the challenges befalling the company’s first facility persist. It had been expected to open by late 2024. Now it is projected to finish construction by 2025.

The delay stems from an “insufficient amount of skilled workers with the specialised expertise”, according to TSMC.

Ask labour leaders, however, and they attribute it to the company’s management, not the lack of skilled American workers.

Michael Dea, a business manager at the Laborers’ International Union of North America’s local chapter in Arizona, said “zero” workers from his union were hired to work at the TSMC site.

The semiconductor giant was not a direct employer and was contracting out recruitment work, he added. “They contacted me about hiring 400 workers. And we were in good negotiations. Well, then I got a letter saying they’re not interested.

“Their problem is their management and supervision, not the skilled and trained workforce that I could bring to that project to help,” Dea said.

He described the union as hopeful that the current negotiations would help resolve these issues and produce a project labour agreement for the second fab.

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That said, other conflicts have flared. Last month, a union representing the state’s plumbers and pipefitters filed a petition with state lawmakers after TSMC announced its intention to bring about 500 workers from Taiwan to complete the project.

The union urged American politicians to “stand with labour and block TSMC from replacing more than 500 American workers”, calling the plan “a slap in the face”.

Aaron Butler, president of the Arizona Building and Construction Trades Council and business manager for United Association Local 469, a union for plumbers and pipefitters, has accused TSMC of “blaming its construction delays on American workers and using that as an excuse to bring in foreign workers who they can pay less”.

“While TSMC claims that these temporary workers will not replace American workers on the job, contractors and workers are being ‘descoped’, which is construction-speak for fired,” he wrote in the Phoenix Business Journal in July. Butler said American workers “have built Intel for over 20 years”, referring to another chip giant.

Amid labour agreement negotiations between TSMC and the unions for the second fab, the petition against the company has been withdrawn.

A rendering of TSMC’s semiconductor fabrication facility in Arizona. Construction is now projected to finish by 2025.

Devlin told the Post that what the company sought was “a very specific proprietary skill that only TSMC uses in their production”. Current labour talks between the two sides include the prospect of transferring that skill to American workers, she added.

As TSMC sees it, the company is building the most cutting-edge semiconductor manufacturing technology in the US, saying it was in a “critical phase of handling all of the most advanced and dedicated equipment in a sophisticated facility”.

The company in a statement said it placed “high value” on “nurturing [the] local workforce and still actively seek to hire from within the United States”.

A recent TSMC post in LinkedIn invited “local trade partners” with experience in semiconductor tool installation to “ensure the success” of the Arizona project, without using the word union.

Reflecting on the developments at the site in Arizona, W John Kao, president of National Tsing Hua University in Taiwan, said there was going to be a “learning curve” for American workers that was not just technical but relating to a “mindset of precision” about “what’s absolutely needed to go into these high-end chips”.

US union fights TSMC plan to use Taiwanese workers on Arizona factory build

Others closely involved in semiconductors have voiced concern as to whether fabs in the US could be as successful as Taiwan’s.

Burn Lin, a former vice-president of R&D at TSMC, said the tech giant has had a factory in Washington state for more than a decade and enlists many local workers.

“We never can make it achieve the same performance as [our] own Taiwan factory,” he noted. “We can never bring it up to the same level, no matter how hard we try.”

Taiwanese workers, like their American counterparts, have their own frustrations.

Kao said many Taiwanese voters were “nervous” about US reshoring rhetoric and were questioning whether bringing Taiwanese engineers would serve Taiwan’s interests, not just America’s.

“Basically, are we being bullied to do something we don’t want to do? What’s in the best interest of the United States, we understand. But is it in our best interest?”

Long before TSMC chip plant, Taiwan enjoyed strong support from Arizona

Engineers and their families might feel “disposable” and reluctant to relocate, knowing that the US’s primary objective is to create local jobs, he added.

Kao contrasted the company’s experience in Arizona with how the planned fabs in Germany and Japan were being “well received” as “win-win” partnerships. He said that “the engineers don’t mind going” to those places.

TSMC is setting up a US$11 billion fab in Dresden and a US$8.6 billion fab in Kumamoto on the island of Kyushu.

Part of the disconnect between the US and Taiwan, according to observers, is how the Arizona plant is being framed in the media.

The overarching message from the US, according to Tain-jy Chen, a professor at the Taipei School of Economics, appeared to be: “The reason that TSMC has to build a factory in Arizona is because Taiwan is too dangerous”.

“The Japanese will never say this,” he said. “They will say, ‘we need you because here [are] our customers, here [is] the local market’.”

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