The Taiwan Semiconductor Manufacturing Company (TSMC) is considering expanding its under-construction facilities in Japan to manufacture advanced semiconductors. TSMC is building a new chip plant in Japan, which is planned to make older, mature chips. Still, according to industry insiders, differences in working culture in America and lower costs in Japan have made management consider expanding the Japanese chip site.
The Taiwanese fab has been expanding its global production base throughout the past couple of years as it adds new plants in the United States, Europe and Japan to its production portfolio. Out of these, the site in Japan is receiving additional attention now, with TSMC currently slated to spend $8.5 billion on the site to start manufacturing the products next year.
TSMC's Potential Expansion In Japan Could Help Asian Country Meet Local Demand
According to a fresh Reuters report, TSMC finds building a chip manufacturing site in Japan relatively easy and cheap. The firm announced in 2021 that it is establishing a new subsidiary in Japan to build a site in the Kyushu island's Kumamoto prefecture. The plant would manufacture 28-nanometer and 22-nanometer chips, and the site would see investments from Japanese consumer electronics and technology giants Sony and Denso.
Like the U.S., Japan also has a vibrant industry capable of delivering robust demand for TSMC's chips. Gauging demand for chips is a crucial part of setting up new chip manufacturing facilities since the investment costs are part of a business model developed to justify the investment.
Reuters' sources believe that TSMC is finding that the costs of building a new plant in Japan are lesser than the ones it faces in the U.S. Additionally, the firm is also comfortable with the working culture in the country, where workers often work long hours. The long hours are suitable for the company, which prefers that its machines run continuously to avoid the recalibration costs incurred if they are shut down.
Another key factor attracting the company to Japan is the lower costs. Industry insiders believe TSMC's cost estimates for the American chip site have proven inadequate. The fab had originally estimated that the plant would cost 20% more to build; however, the costs have risen and are estimated to be 50% higher than those it would have incurred in Japan.
The differences in working culture are not only hampering the progress of the American chip site. TSMC is wary of similar problems for a German chip plant. This plant saw some flurry of news last month after TSMC committed 3.5 billion Euros to the site as part of an ambitious $11 billion investment through partnerships with local companies and subsidies from the German government. However, long holidays and strong labor union laws have created fears in TSMC's management about the risk of low output from the European site.
TSMC's site in the U.S. has been facing a lot of controversy as the firm faces off with worker unions. The key pain point between the two parties is the installation of high-end chip fabrication machines, which TSMC claims can be installed only by skilled technicians from Taiwan to speed up the process. However, local unions have accused the firm of unsuitable work and safety practices, which TSMC has refuted by pointing out that its safety record in Arizona has been exemplary.
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