The world’s largest chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC), is facing delays in the production of 4nm chips at its new facility in Phoenix, Arizona. The company has pushed back the start of production to 2025 due to labor shortages. This delay has consequences for major tech companies like Apple, Nvidia, and AMD, which have plans to source chips for their products from TSMC’s US plant.
TSMC’s first fab in Phoenix, which began construction in 2021, was initially expected to start producing 4nm chips next year. However, due to a lack of skilled workers with the expertise required for equipment installation in a semiconductor-grade facility, the timeline has been extended. TSMC’s chairman, Mark Liu, mentioned this challenge during the company’s Q2 earnings call. The company is currently working on a solution by planning to temporarily send experienced technicians from Taiwan to train local workers in Arizona.
Last month, it was reported that TSMC is sending a task force of over 500 experienced workers from Taiwan to help with equipment setup in the Arizona plant. Despite this effort, progress has been slow, partly due to weaker market demand for TSMC’s chip production. The company’s Q2 earnings report showed a 10% decrease in revenue and a 23% decrease in profits compared to the same period last year. TSMC’s CEO, Che Chia Wei, projected a 10% revenue drop for the full year due to declining demand for consumer electronics.
The demand for advanced chips has surged recently, driven by the popularity of generative artificial intelligence models like OpenAI’s ChatGPT. TSMC is struggling to meet the increased demand, resulting in a capacity shortage. However, Wei remains optimistic that the situation will improve by the end of next year. In the meantime, the company is working with its customers to address the short-term supply constraints and aims to double its capacity as soon as possible.
To support its manufacturing efforts in the US, TSMC is working with the government to maximize the subsidies and tax credits available in the CHIPS Act. This legislation aims to boost domestic semiconductor manufacturing by providing financial incentives to companies. TSMC’s focus on the US market is evident, as 66% of its total net revenue for 2023 comes from customers based in North America, while China and EMEA (Europe, Middle East, and Africa) account for only a fraction of that revenue.
The delays in TSMC’s Arizona plant highlight the challenges of bringing chip manufacturing capacity in-house, despite the efforts of the Biden administration to boost domestic semiconductor production. These challenges include skilled labor shortages, weaker market demand, and the complexity of setting up a semiconductor-grade facility. However, TSMC remains committed to expanding its production capabilities in the US and working closely with the government to capitalize on available incentives.
In conclusion, TSMC’s planned production of 4nm chips at its Arizona facility has been delayed to 2025 due to labor shortages. Major tech companies like Apple, Nvidia, and AMD, which rely on TSMC’s production capacity, will be affected by this delay. TSMC is taking steps to address the challenges by sending experienced technicians from Taiwan to train local workers and working with the US government to maximize incentives. However, these delays serve as a reminder that establishing chip manufacturing capacity in-house is a complex task with various obstacles to overcome.
