Arizona Facility Encounters Regulatory, Labor, and Supply Chain Hurdles in Bid to Compete with Taiwan Operations
Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading chipmaker, is grappling with substantial hurdles in its attempt to establish cutting-edge semiconductor production at its Arizona facility. Despite its $65 billion investment in the U.S. and government backing, the company’s efforts to replicate the success of its Taiwanese factories are being hindered by complex compliance issues, construction delays, and a lack of skilled labor.
According to TSMC CEO C.C. Wei, building the Arizona plant has been significantly more challenging than similar projects in Taiwan, with regulatory requirements and permitting processes in the U.S. taking up to twice as long. These delays have made it increasingly unlikely that the Arizona plant will be able to implement TSMC’s most advanced chip technologies ahead of its Taiwanese counterparts.
Wei explained during a recent event at National Taiwan University that every step in the construction process requires multiple permits, and even once approvals are secured, the implementation phase is much slower compared to Taiwan. The intricate regulatory landscape and permitting hurdles have significantly impacted the project’s progress, especially as TSMC has committed to producing cutting-edge chips at the Arizona site.
Despite these challenges, TSMC remains optimistic that its U.S. facility will eventually deliver chips on par with those made in Taiwan. The company is investing heavily in overcoming these operational bottlenecks, including the establishment of 18,000 regulatory rules at a cost of $35 million, as well as hiring a specialized team to work with local authorities on regulatory matters.
Further complicating matters, the cost of materials and a shortage of skilled labor have added significant financial strain to the project. For example, the cost of sulfuric acid, a key chemical for chip production, is five times more expensive in the U.S. than in Taiwan, forcing TSMC to ship it from Taiwan to Los Angeles before transporting it by truck to Arizona. Labor shortages have also forced TSMC to relocate half of its construction workforce from Texas to Arizona, further increasing expenses.
However, despite these difficulties, the U.S. government has remained steadfast in its support of TSMC’s expansion, viewing the facility as a critical step in reducing the country’s reliance on Asian semiconductor production. The U.S. has provided a $6.6 billion grant to aid the project, and Commerce Secretary Gina Raimondo recently announced that TSMC had begun producing advanced 4-nanometer chips for American customers at the Arizona plant.
While TSMC’s Arizona facility is a key element of the U.S. strategy to rebuild its domestic semiconductor industry, Wei’s comments underscore the significant challenges that lie ahead in establishing state-of-the-art manufacturing in a new regulatory environment. Despite these obstacles, TSMC is committed to navigating these complexities and ensuring that its Arizona operations eventually meet the high standards set by its flagship Taiwanese factories.
