A factory belonging to Taiwanese semiconductor manufacturer TSMC at the Central Taiwan Science Park in Taichung. Photo: AFP / Sam Yeh

The plan of Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chip maker, to build a 5-nanometer fab in the US has recently caused concerns among economists and industry experts in both Taiwan and the mainland but for different reasons.

Taiwanese chip industry experts said TSMC might face higher production costs in the US while its recruitment plan could fuel the labor shortage problems in Taiwan.

In mainland China, Chen Wenling, chief economist and deputy director of the Executive Board and Academic Committee at the China Center for International Economic Exchanges, said Beijing should “reclaim Taiwan” so the US could not take away TSMC’s technological know-how. Chen’s comments were widely circulated by Chinese websites.

Since the US and China started a trade and technology war in 2018, Washington has pushed forward a restructuring of its global supply chain in a bid to protect its national security. The US government wanted to boost its high technology sector by forming a stronger partnership with its allies, especially Taiwan and the island’s chip makers.

With support from the US government and the State of Arizona, TSMC had announced in May 2020 its plan to build and operate a 5-nanometer semiconductor fab in northern Phoenix, Arizona, in the US.

It said its total spending on this project, including capital expenditure, would be approximately US$12 billion from 2021 to 2029. Construction was planned to start in 2021 with production targeted to begin in 2024.

TSMC currently operates a fab in Camas, Washington, and US design centers in both Austin, Texas, and San Jose, California. The Arizona facility would be TSMC’s second manufacturing site in the country.

Last October, media reports said the construction plan of TSMC’s fab in Arizona faced a three-to-six month delay due to Covid and the labor shortage. However, the company said the plan was on schedule. It said the fab would produce 20,000 wafers a month starting in the first quarter of 2024.

On May 27, Nikkei Asia reported that TSMC faced an uphill battle in recruiting workers in the US. It pointed out that not many university graduates wanted to enter the chip-manufacturing sector while most of those who were interested in it were hired by Intel Corp. Although TSMC is the world’s largest chip maker, it lacks prestige in the US job market.

Prior to this, Morris Chang, founder and former chief executive of TSMC, warned about the high cost of operating a fab in the US. On April 14, Chang said in a speech at an event organized by the Brookings Institution, a US think tank, that the cost of producing chips in the US was 50% higher than that in Taiwan. He also said TSMC’s way of management in Taiwan might not work in the US.

Liang Chi-yuan, former chairman of the Chung-Hua Institution for Economic Research, told China Review News Agency, a Hong Kong-based pro-Beijing news website, that the US wanted to attract TSMC to set up fabs there so it could produce more chips locally and protect its national security. Liang said the US had no choice but to subsidize the additional costs of TSMC’s US-based fabs.

Liang said Chang raised concerns as he wanted the US Congress to pass the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act as early as possible so that TSMC could get the subsidies promised by the US government.

In May last year, a bipartisan group of US senators proposed a bill, namely the CHIPS for America Act, which involved a US$52 billion package that would increase US chip manufacturing and research over the next five years. In the same month, media reports said TSMC was considering expanding its Arizona chip fab to six factories,

In June 2021, the Senate passed the bill and the US House of Representatives passed its version of the bill this February. Last month, media reports said it could take several more months before the Senate and the House of Representatives could reach a final agreement.

Lin Yi-jing, a former researcher at IBM’s Watson Scientific Computing Laboratory, said it was natural that TSMC had faced a difficulty in recruitment in the US as the Taiwanese brand was not as popular as its rivals such as Intel there.

Besides, Lin said a chip-making specialist who’s a graduate from a top-tier US university could make US$200,000 a year, three times what a Taiwanese expert could earn in Taiwan. He said most of the Taiwanese specialists who moved to the US with work visas would eventually jump to the US firms after they gained permanent residency. He said such a trend would fuel Taiwan’s labor shortage problems.

While Taiwan is worried about a potential exodus of talents to the US, Beijing also raised concerns about the matter, but from its own interest.

Mainland economist Chen Wenling said in a forum organized by the Chongyang Institute for Financial Studies at Renmin University of China on May 30 that Beijing should take actions to prevent the US from taking away TSMC’s technological know-how.

“As the US and the West could impose destructive sanctions on China just like what they have done to Russia, we must reclaim Taiwan,” Chen said. “In terms of the restructuring of the supply chain, China must grab TSMC, a company that originally belongs to the country.”

She said within the short run, China should proactively cooperate with the US in topics such as climate change and try by all means to delay the time when the US decides to cut off its supply chain and technological partnership with China.

Chen said China should not let TSMC fully realize its plan to build six fabs in Arizona. She did not elaborate how Beijing could achieve this. In fact, Chinese chipmaker SMIC has in recent years paid a premium to lure many Taiwanese chip engineers to move to the mainland.

Taiwanese newspapers criticized Chen for saying “reclaim Taiwan” and “grab TSMC” as the Taiwanese firm had never belonged to mainland China.

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