Summarize the following in four sentences or less.:
TSMC complains it can’t find enough skilled workers to get its Arizona chip plants ready in time, delaying mass production to 2025
57
Nicholas Gordon
Fri, July 21, 2023 at 6:01 AM GMT-4·4 min read
In this article:

2330.TW
-3.28%
Watchlist

Watchlist
Significant Event
 | 
2d
yahoo plus badge
Tsmc Will Solve Issue Of Higher Costs In Overseas Fabs

TSM
-0.62%

Taiwan Semiconductor Manufacturing Company is finding it harder to make chips in the U.S. than it anticipated.

The chipmaker will likely delay the production start date of its Arizona plants to 2025, the company announced on Thursday during its second quarter earnings call. TSMC had originally hoped to start manufacturing chips in Arizona by late 2024.

“There is an insufficient amount of skilled workers” with the expertise to build a chip factory, TSMC chairman Mark Liu complained during a call with analysts. The executive warned the company might have to fly in “experienced technicians from Taiwan to train the local skilled workers for a short period of time.”

TSMC is currently negotiating with the U.S. government to offer accelerated non-immigrant visas to about 500 Taiwanese engineers, Nikkei Asia reported in late June citing chip supply chain executives.

The Arizona factories are key to both TSMC and the Biden administration’s plan to expand chip manufacturing in the U.S. The CHIPS and Science Act, passed last August, puts aside $52 billion in government subsidies for U.S. chip manufacturing. Last December, TSMC announced that it was doubling its investment in Arizona to $40 billion, in a blockbuster event that featured U.S. President Joe Biden, Apple CEO Tim Cook and Nvidia CEO Jensen Huang.

The Taiwanese chipmaker hopes to receive a total of $15 billion in government support for the plants, the Wall Street Journal reported in April. Yet the chipmaker is uneasy about some of the conditions for funding, including profit-sharing agreements. (Other chip companies have complained about other provisions, including a requirement to provide childcare and constraints on expanding chip manufacturing in China.)

TSMC did not immediately respond to a request for comment.

Working culture
TSMC needs to hire thousands of workers to help build and operate its Arizona plants. Yet the company is known for a tough and domineering working culture. While the attitude perhaps works in Taiwan, where TSMC pays above-market rates among a workforce with lots of STEM graduates, it’s proven less effective in the U.S., where competitors like Intel are willing to pay top dollar for more scarce talent.

“Twelve-hour days are standard, weekend shifts are common,” one TSMC engineer wrote on employer review website Glassdoor, Fortune previously reported. Another employee warned that TSMC “is about obedience” and is “not ready for America.”

TSMC also requires engineers to spend as much as 18 months in Taiwan for training. Inbound trainees have clashed with TSMC’s veteran staff and their top-down management culture upon arrival.

The company’s executives dismiss concerns about tough working conditions. Liu, in response to an article from Fortune, told shareholders in June that “those who are unwilling to be on duty should not be in this industry,” according to Central News Agency, a Taiwanese wire service.

And at a July conference, TSMC founder Morris Chang said he found President Biden’s pledge to build the Arizona factories with union labor to be “painful.” Chang is not a fan of unions, previously crediting the success of companies like Microsoft and Google to their non-unionized workforces.

Chip sluggishness
A sluggish chip market may be another reason for the delay.

Consumers are buying fewer consumer electronics, while retailers and manufacturers are still working through excess inventory built up during the disruptions of the COVID pandemic. That’s created a glut in chips that’s dragging down the revenues of chipmakers.

TSMC forecast its sales in 2023 will drop by 10%, which is a more pessimistic outlook than what it gave earlier this year, when it projected a drop in the low-to-mid single digits. TSMC's Taiwan shares fell by over 3% in Friday trading.

TSMC’s warning dragged down the entire chip sector. The Philadelphia Semiconductor Index, which tracks several dozen chip companies including Intel, Nvidia, and TSMC, fell by 3.6% on Thursday.

Investors have flocked to some chip stocks thanks to the rise of A.I., however. Nvidia, a market leader in producing the processors that train A.I. models, broke one trillion in market capitalization earlier this year after forecasting bumper sales thanks to A.I.

Yet TSMC doesn’t think the A.I. boom will be enough to offset broader weakness in the industry. A “short-term frenzy” about A.I. can’t be extrapolated long-term, Liu warned during Thursday’s analyst call.

This story was originally featured on Fortune.com