The labor dispute sparked by TSMC’s venture into the United States is poised to come to a close. TSMC’s Arizona plant and the local labor union, Arizona Building and Construction Trades Council (AZBTC), announced an agreement yesterday. TSMC will collaborate with the local union to establish a workforce training program and maintain transparency on public safety issues.

However, TSMC also retains some flexibility, aiming to recruit local employees while seeking the option to hire foreign workers with “specialized experience” if deemed necessary.

It is anticipated that this agreement aligns with TSMC’s prior request for the dispatch of 500 professional equipment engineers from Taiwan to the United States. This move, with the successful acquisition of technical construction permits, is expected to facilitate the expedited installation of equipment, ensuring smooth operational processes in the future.

While TSMC’s move to set up a factory in the United States was fueled by favorable policies, it faced challenges as contractors were unfamiliar with U.S. regulations, causing delays in mechanical and electrical integration and cleanroom construction.

To expedite the installation of advanced process equipment for the groundbreaking four-nanometer fabrication process in the U.S., TSMC had to mobilize nearly 500 personnel from Taiwan for intensive installation work before system integration.

This decision sparked a strong backlash from the AZBTC, criticizing TSMC for disrespecting local technicians’ expertise and raising concerns about TSMC’s potential intention to introduce cheaper labor, impacting local job rights.

Although TSMC consistently emphasized maintaining good interactions with various unions in Arizona, some union representatives were displeased with TSMC’s practice of dispatching personnel through suppliers. Reportedly, they called on the state and federal governments to pressure TSMC, leading to unexpected delays in the installation of new equipment.

After months of negotiation between TSMC and AZBTC, an agreement was reached, listing agreed-upon priority areas, including union training, communication channels, and on-site personnel allocation. However, TSMC, considering global talent distribution, retained the flexibility to hire foreign construction personnel with specific expertise in certain circumstances.

According to the Greater Phoenix Economic Council(GPEC), the specific terms of the agreement reached between the two parties are as follows:

1. Enhanced Workforce Training and Development

A highly skilled, diverse, and inclusive construction workforce is necessary to meet the timelines of the two fabs. The AZBTC intends to recruit a sufficient number of skilled workers to fulfill manpower requirements of TSMC Arizona’s contractors for the Project. TSMC Arizona will partner with AZBTC on the development of union workforce training programs and curricula. The goal will be to build a construction workforce that can support TSMC Arizona in the near and long term with employment opportunities.。

2. Shared Commitment to Site Safety

TSMC Arizona is deeply committed to workplace safety in the operation of all its facilities. To enhance the partnership, TSMC Arizona will maintain transparency with AZBTC with regards to safety assessments, audits, incident records and improvement plans.

3. Industry Leading, Global Workforce

TSMC Arizona is focused on hiring workers locally in the United States. The AZBTC workforce is highly skilled in constructing microchip manufacturing plants. Circumstances may require TSMC Arizona or its vendors to employ foreign workers with specialized experience.

4. Open and Regular Communication

To ensure TSMC Arizona and AZBTC are fulfilling the spirit of the agreement outlined, and accountable to commitments made, ongoing communication and review via regular forums will be critical. A committee will be formed, consisting of members designated by the affiliated AZBTC unions and members designated by TSMC Arizona and the contractors. These meetings will be held quarterly, one of which will be an annual forecast meeting to project future workforce requirements.

The report notes that TSMC also mentioned in a joint statement that its construction of a fab in Arizona represents the largest single foreign direct investment in the state’s history. This wafer fab is set to be the most advanced semiconductor manufacturing base in the United States, creating thousands of stable and high-paying job opportunities locally.

The ongoing construction of the wafer fab’s two-phase project has already generated thousands of jobs in accordance with the prevailing industry wage standards for members of the AZBTC.

(Photo credit: TSMC)

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On December 6, TSMC held a ceremony for the first tool-in of its new Arizona fab. This event came after the foundry giant had publicized a series of overseas expansion projects. Within Taiwan, TSMC’s recent announcements have caused a stir in public opinion. Concerns have been raised about the possibility of a hollowing out of the island’s semiconductor industry due to a mass exodus of professionals involved in chip manufacturing.

TSMC’s Overseas Expansion Plan

TSMC actually embarked on the path to internationalize its business operations much earlier in 2015, when it made the announcement to build a fab in Nanjing, Mainland China. At that time, the chief reason behind this expansion project was that Huawei had become the second most important client next to Apple. Also, TSMC planned to have its 16nm node serve as the main manufacturing technology of the Nanjing fab. This decision was in line with the semiconductor technology export rules enforced by Taiwan’s Ministry of Economic Affairs. Specifically, domestic chipmakers are only allowed to deploy “n-1” technologies at overseas manufacturing sites. Despite being in compliance with all domestic laws and regulations, TSMC still attracted a lot of controversies with establishing a base of operation in Mainland China, and there were speculations that more advanced semiconductor technologies will be leaving Taiwan with the “westward expansion”.

Fast-forward to present day, China is not the only one that is focusing on the development of a homegrown semiconductor industry. After witnessing the impact of the COVID-19 pandemic on the global supply chain, many other countries are reconsidering the importance of semiconductor supply in their own industries. From the US to Japan and European countries, governments have begun to offer various subsidies and market-based incentives in order to entice major semiconductor manufacturers such as TSMC to build fabs in their territories.

A detailed survey of TSMC’s overseas expansion activities from 2015 onwards finds that the construction of the Nanjing fab commenced in 2016 a year after the announcement of the project. The fab then celebrated the formal start of mass production with a ceremony in 2018. Two years later, in 2020, TSMC revealed the plan to build a 12-inch wafer fab that deploys advanced nodes in Arizona. Moving into 2021, the foundry giant unveiled two more expansion projects in Japan. The plan to open a “3D IC material R&D center” in Tsukuba (Ibaraki Prefecture) was announced first. Later in October of that same year, TSMC said it will set up a fab in Kumamoto.

Where Will TSMC Go After US?

Regarding the locations of TSMC’s fabs worldwide, TrendForce’s latest research reveals that for 12-inch wafer foundry, TSMC has four fabs in Taiwan, including including two upcoming greenfield projects respectively located in Hsinchu and Kaohsiung. Outside Taiwan, TSMC has one operational 12-inch wafer fabs in Mainland China and two more under construction in the US and Japan. Besides these existing and planned fabs, a close eye is also being kept on TSMC’s possible expansion into the EU states. Germany has long been rumored to be TSMC’s candidate for setting up a fab in Europe. However, Ireland has a lot of potential as well since Intel previously announced its intention to expand its existing manufacturing operation in this country. Currently, TSMC is internally assessing the feasibility of landing a project in Ireland.

Taiwan Still Has Advantages in Talents, Business Culture, and Complete Industry Ecosystem

Going back to the issue of whether TSMC’s overseas expansion activities will negatively affect Taiwan’s semiconductor industry by causing an outward migration of related professionals or a weakening of the industry’s competitive advantage. According to TrendForce analyst Joanne Chiao, the deglobalization trend is gradually emerging in the supply-demand dynamics of the semiconductor market. Based on the latest data, the geographical distribution of TSMC’s production capacity (that is calculated in thousands of 12-inch wafer equivalents per month) for 2022 is estimated as follows: 93% in Taiwan, about 6% in Mainland China, and 1% in the US. The short-term effects of TSMC’s overseas projects will thus be very limited as the majority share of the foundry’s production capacity is going to stay in Taiwan.

As for the effects on the competitiveness of the domestic semiconductor industry in the long run, Chiao believes that deglobalization will lead to a general rise in operating costs for foundries worldwide. This means that every foundry will be facing increasing pressure related to pricing regardless of where they put their fabs. On the other hand, Taiwan’s importance as the world’s main chip production base will diminish somewhat over time because of the deglobalization trend.

Nevertheless, the foundry industry depends on tight relations with clients as well as highly synchronized and meticulous services among all participants across the supply chain. This is where Taiwan shines because the island is home to a complete ecosystem for the foundry industry. All participants in this ecosystem advance together when it comes to upgrading technological capabilities or overcoming technological bottlenecks. Apart from these advantages, a system of management has been well established on the island for the various aspects of fab operation. As foundries keep their fabs running 24/7, they are constantly tested in manpower scheduling. Therefore, they have to rely on locally cultivated talents and local experience that have taken decades to amass. In other words, fabs in Taiwan are performing at the highest level because of the local business and work culture.

（Image credit: TSMC Linkedin）