Taiwan Semiconductor Manufacturing Co TSM and Intel Corp INTC face headwinds in their quest to fortify the American semiconductor supply chain, encountering delays from crucial suppliers in Arizona.
Initial plans of key suppliers like LCY Chemical, Solvay, Chang Chun Group, KPPC Advanced Chemicals, and Topco Scientific to establish facilities in Arizona have hit roadblocks, primarily due to escalating construction costs, labor shortages, and operational hurdles.
Exploring the Challenges: Surging expenses for materials and labor, a dearth of construction workers, and a flurry of investments flooding Arizona have compounded the challenges faced by the suppliers.
The gradual expansion pace of Intel and TSMC has also played a role in impacting the suppliers’ timelines, disrupting the ecosystem’s momentum.
These setbacks are not mere blips but reflections of fundamental challenges in scaling up the U.S. chip supply chain, raising red flags for the industry’s growth trajectory.
Establishing a facility in Arizona now costs four to five times more than in Asia, with some executives citing expenses as “several times” higher than initial estimates, signaling a significant cost barrier.
In response to the financial strain, companies like LCY Chemical are reevaluating their U.S. expansion strategy, opting to manage costs by importing chemicals initially rather than rushing into local production infrastructure construction.
Furthermore, the delays underscore a cautious stance adopted by suppliers, wary of stretching too thin before market demand solidifies.
Regulatory, environmental, and safety considerations specific to chemical plant construction add layers of complexity to the suppliers’ decision-making process, emphasizing the intricate nature of the semiconductor industry’s landscape.
Prior reports highlighted the challenges faced by TSMC and Samsung Electronics, Nvidia’s suppliers, in setting up U.S. production facilities, grappling with skilled labor recruitment and heightened production costs compared to their home countries.
As TSMC explores building fabs for 2-nanometer chips in Hsinchu and Kaohsiung cities, Samsung’s significant investment in an advanced semiconductor project near Seoul emphasizes the ongoing global competition in chip technology.
TSMC’s plans for a second plant in Kumamoto, Japan, with a potential $13.5 billion investment, including wafer and chip factories, align with the company’s strategic global footprint expansion.
Due to staffing challenges and labor disputes, TSMC and Samsung have postponed production timelines in Arizona and Texas, respectively, impacting their U.S. operations.
Taiwan Semiconductor’s stock surged 52% last year amid the AI wave, showcasing investor confidence in the semiconductor industry’s growth potential.
Disclaimer: This content was partially produced with the help of AI tools and reviewed by Benzinga editors before publication.
Photo courtesy: Shutterstock
