TAIPEI -- Taiwan Semiconductor Manufacturing Co. and its suppliers plan to send several hundred additional workers from Taiwan to Arizona in order to speed up construction of its first chip plant in the U.S. in more than two decades, sources briefed on the matter told Nikkei Asia.

Construction of the plant has already fallen behind schedule due to labor shortages and other factors, and TSMC, the world's largest contract chipmaker, has admitted construction costs have exceeded expectations.

The decision to dispatch more workers from Taiwan highlights not only the challenges facing TSMC's overseas expansion push but also the hurdles for Washington as it attempts to onshore cutting-edge semiconductor production and rebuild its tech supply chain.

TSMC and its suppliers are in talks with the U.S. government to assist with the application process for non-immigrant visas in a bid to dispatch more than 500 experienced workers as early as July to expedite the construction of cleanroom facilities and the installation of pipelines and other equipment, three chip supply chain executives said.

One of the main aims is to "improve work efficiency and help make up for lost time" in the construction processes, they said. The U.S.-bound workers will include contract technicians and workers with hands-on experience in cleanroom setup, pipeline installation, mechanical and electrical systems for chip plants, and other specialized areas.

"There are not enough U.S. workers who have good first-hand experience specifically on building semiconductor manufacturing facilities, and many are not familiar with the requirements for chipmaking plants," one executive told Nikkei. "That has caused delays in multiple installation works."

TSMC told Nikkei Asia that it is sending experienced, specialist workers from Taiwan because it is now at "a critical phase, handling all of the most advanced and dedicated equipment in a sophisticated facility." The number of workers heading to Arizona has not been determined, the company said, but it emphasized that the special task force will only be there for a limited time to accelerate the project and will not impact the 12,000 workers currently on site every day or its U.S.-based hiring.

The Taiwanese chipmaker originally said mass production at the plant would begin some time in 2024, but recently narrowed down the timeframe to late 2024 to give itself more of a buffer to handle uncertainties. Labor shortages and delays in receiving various permits for operations and safety have hampered construction progress, but analysts say TSMC has also intentionally slowed the pace of its expansion push amid a downturn in the chip industry.

The wages for construction workers on the U.S. plant are "several times" higher than in Taiwan, supply chain executives said, even though their efficiency is less assured. TSMC and its suppliers have already sent many additional supervisors to monitor and facilitate the building progress of cleanrooms and power and water systems.

"It is challenging and costly for Taiwanese cleanroom builders to communicate with foreign construction workers in an unfamiliar environment. Sending experienced construction contractors and their workers who worked with the chip suppliers before from Taiwan could save lots of time and costs," one supplier said.

The U.S. government is incentivising companies to invest in the U.S. in an attempt to rebuild a complete semiconductor ecosystem on American soil. Last week, the government started accepting applications for large-scale chipmaking projects to receive subsidies under the CHIPS Act.

The Department of Commerce is overseeing more than $50 billion to revitalize the U.S. chip industry, including $39 billion earmarked for semiconductor manufacturing incentives. In October, the program will also start taking applications from chip material and equipment producers.

TSMC celebrated the start of production equipment being moved into the Arizona facility late last year with a ceremony attended by U.S. President Joe Biden and chief executives from Apple, Nvidia and AMD, among others. However, the installation schedules of many other production tools have been postponed from early spring to August or later, multiple suppliers who participated in the project said.

The installation of chipmaking tools is a key milestone in chip facility construction and an indicator of how soon operations can commence. After installing the equipment, it can take up to a year for production lines to be qualified and production ramped up, industry executives told Nikkei Asia.

TSMC announced it was building a chip plant in Arizona back in May 2020 and said it started construction in June 2021. In Taiwan, TSMC can usually put a chip plant into production within 30 months, but it could take more than three years to get the U.S. plant up and running.

Peter Hanbury, a partner with Bain specializing in manufacturing and the chip industry, said it is always challenging for chipmakers and other manufacturers to build production capacity in a new country.

"While TSMC has a highly efficient repeatable model building several fabs every year in Taiwan, we've found that chip manufacturers can face new challenges when entering into new geographies, such as working with new suppliers with different ways of working, different construction supplier management models, stricter environmental regulations requiring design changes and stricter safety regulations impacting worker productivity," Hanbury said.

He added that the current labor shortage in the U.S. could make those challenges worse. "Shortages we see include both typical construction labor such as mechanical and electrical but also specialized skills like experience working in a cleanroom environment... for chip facility construction," he said.

Some analysts said sluggish demand is another reason that TSMC has delayed its expansion drive.

"TSMC's slow progress in Arizona has to do with the overall market demand weakness that has also impacted... leading-edge chip production," said Charles Shi, an analyst with Needham, a U.S.-based investment bank. "TSMC is a for-profit enterprise operating in a free market... Right now what is best for the business is to slow down the pace of expansion when market demand is still weak."

TSMC has announced it will triple its investment in the U.S. to $40 billion, and bring cutting-edge 3-nanometer chip production to the U.S.

Source:CHENG TING-FANG and LAULY LI, Nikkei Asia tech correspondents