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‘Frustrated’ in US, TSMC Finds Japan Chipmaking a ‘Natural Fit’

The Taiwanese chip giant is considering setting up a second fab in Japan, and adding capacity to an $8.6 billion plant already under construction in the country

A logo of Taiwan Semiconductor Manufacturing Co (TSMC) is seen at its headquarters in Hsinchu
TSMC is set to open its first plant in Japan after a major push into chipmaking abroad, as Taiwan faces increasing risks of a Chinese invasion. Photo: Reuters.


The world’s biggest contract chipmaker, TSMC, is increasingly viewing Japan as a more natural fit in terms of work culture, sources say, as it faces increasing problems at its upcoming facility in Arizona.

The Taiwanese chip giant is considering setting up a second fab in Japan, and adding capacity to an $8.6 billion plant already under construction in the country, as it views the Japanese government easier to deal with and generous with subsidies, the sources added.

In Arizona, meanwhile, TSMC has struggled to recruit workers for the gruelling chipmaking trade and faced pushback from US unions on efforts to bring in workers from Taiwan.


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If TSMC finalises its expansion plans, it would be a boost to Japan’s efforts to regain its lost status as a chip manufacturing powerhouse. The country is also aiming to support its automotive and electronics industries amid growing regional competition.

For TSMC, the move will be part of an unprecedented push into manufacturing overseas, as Taiwan – home to the chipmaker’s most advanced chip facilities – faces increasing risks of a Chinese invasion.


Massive costs at US fab

A $40 billion investment in Arizona also allows TSMC to add capacity outside Taiwan, where it faces constraints on land, power, water and labour.

The chipmaker plans to produce advanced chips in the state but sources say the company is frustrated.

TSMC thought costs to build a fab would be 20% higher in the US than in Taiwan but they are actually about 50% higher, an investor briefed by company management said.

A shortage of skilled workers has also forced the company to push back production at its first fab by a year to 2025.



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“Any project… will have some learning curve. In the past five months the improvement has been tremendous,” TSMC Chairman Mark Liu said of the Arizona project last week.

Fabs in the US, Japan and Germany, where it is also expanding, are “inherently incomparable” due to differences in location, setup and scope, TSMC said.

All three countries have offered TSMC billions of dollars in subsidies for it to localise production in efforts to diversify the supply of chips, which are essential to the defence, automotive and electronics industries.


Japan relationship ‘mutually beneficial’

Amid these challenges, TSMC is taking an increasingly optimistic view of Japan, industry sources say. The chipmaker is keen to ensure a smooth ramp up at its under-construction fab in a chipmaking hub on the island of Kyushu.

The facility is on track to start producing mature-technology chips in 2024, sources said.

“The relationship between TSMC and the Japanese government is mutually beneficial,” said Lucy Chen, an analyst at Isaiah Research.

Japan’s advantages for the chipmaker include its network of chip equipment and materials suppliers, similarities in work culture and proximity to Taiwan, she added.

TSMC sees workers in Japan, which is known for long hours and strong commitment to employers, as more willing to work a punishing schedule with overtime as chipmaking machines run around the clock in sterile clean rooms, the sources said.

“A lot of machines cannot be shut down because it costs TSMC to recalibrate on rebooting,” said a chip industry executive.


Taiwanese workers ‘welcome’ in Japan

It is only a two-hour flight to Kyushu, where TSMC is partnering with companies including Sony, a leading maker of image sensors.

Taiwanese workers arriving to help set up the fab are also welcome, and the chipmaker will pay higher wages to secure local employees as it competes with rivals such as foundry venture Rapidus, the sources said.

“It seems to us that TSMC is really positive about investment in Japan,” said a senior official at the powerful Ministry of Economy, Trade and Industry (METI), which has offered subsidies worth up to 476 billion yen ($3.23 billion) for the first fab.

“We will really welcome the second fab project in general but we have to see the detail first,” the official said.

While many equipment and materials makers already have global operations, to meet its exacting standards TSMC has also brought suppliers to Japan from Taiwan, the sources said.


Capital concerns

The chipmaker’s enthusiasm for Japan, however, is being tempered by concerns about higher costs across the business and worries about the macro environment, the sources said.

TSMC’s capital expenditure ballooned to $36 billion last year from $10 billion in 2018, with the company forecasting a slightly smaller outflow this year. Expenses in the US have played a major role in expanding TSMC’s outflows.

The chipmaker plans to build an $11 billion fab in Germany with local firms but is also concerned the work culture there, with long vacations and strong unions, will hit output, the sources said.

Investors worry about the effect of higher costs but “the impact on TSMC today has not been that big because its leading technology gives it pricing power”, Brady Wang, an analyst at research firm Counterpoint, said.


  • Reuters with additional editing by Vishakha Saxena


Also read:

Arizona Workers Say Building TSMC Factory ‘Worst Job Ever’ – BI

High Cost, ‘Unmanageable’ US Staff Plague TSMC in Arizona – NYT

TSMC Drafts in More Taiwan Workers to Speed Up US Fab Build

TSMC’s Tough Standards Could Hit Hunt for US Staff – Fortune

TSMC Seeks up to $15 Billion in US CHIPS Act Subsidies

China’s Economic ‘Crisis’ Makes Taiwan War Less Likely: Biden

Taiwan Will Not Let US Blow up TSMC if China Invades – TN



Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]


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