TSMC Eyes Japan as Favorable Chip Manufacturing Base Amid Arizona Challenges

Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract chip maker, is reportedly exploring Japan as a promising location for chip manufacturing amid challenges faced at its Arizona facility, according to industry sources. TSMC's efforts in Arizona have been hindered by difficulties in recruiting workers for the demanding chipmaking trade and resistance from unions regarding the import of labor from Taiwan.

In contrast, TSMC is gaining confidence in Japan, where it is constructing an $8.6 billion fab on the island of Kyushu, set to commence production of mature-technology chips in 2024. The company is even contemplating the addition of capacity and a second fab in Japan, potentially for the production of more advanced chips.

While TSMC navigates the complexities of expanding in Japan, its success in the country could significantly bolster Japan's ambitions to reclaim its status as a chip manufacturing powerhouse. This move aligns with Japan's goals of supporting its automotive and electronics industries in the face of increasing regional competition.

TSMC, in a statement, emphasized that its overseas expansion plans depend on various factors, including customer requirements, government support, and cost considerations.

In Arizona, TSMC is planning to produce advanced chips but has faced challenges related to a shortage of skilled workers, leading to a delay in production at its first fab until 2025.

TSMC's Chairman, Mark Liu, commented on the Arizona project, stating that despite the initial hurdles, there has been significant improvement in the past five months.

TSMC has received substantial subsidies from the US, Japan, and Germany to localize production, aiming to diversify the chip supply, which is crucial for the defense, automotive, and electronics industries.

Japan, in particular, is considered a favorable location for TSMC due to its cultural compatibility, cooperative government, and generous subsidies. Japan's strengths include its network of chip equipment and materials suppliers, similar work culture, and proximity to Taiwan.

TSMC sees Japanese workers as more inclined to work rigorous schedules with overtime, which is vital in chip manufacturing, where production machines operate continuously in clean rooms.

Furthermore, TSMC's partnership with companies like Sony in Kyushu and its willingness to pay competitive wages to local employees demonstrate its positive outlook on investing in Japan.

While TSMC is enthusiastic about expanding its presence in Japan, concerns about rising costs and macroeconomic conditions temper its ambitions. The chipmaker is also cautious about building a fab in Germany due to concerns about the work culture, holidays, and strong unions potentially affecting output.

Despite these challenges, TSMC's leading technology and pricing power have helped mitigate the impact of increased costs, providing confidence in its ability to navigate the evolving landscape of global chip manufacturing.

By fLEXI tEAM