The Real Reason Why the US Can't Build Semiconductor Factories [Tech Talk]

Semiconductor Fab Construction Requires Multiple Industrial Technologies
US Specialized in Design and Equipment, Reshoring Difficult
Morris Chang Predicted This Situation a Year Ago

The semiconductor factory (fab) that TSMC is building in Arizona, USA, is the crowning achievement of the Biden administration's CHIPS Act. President Joe Biden allocated $52.7 billion in subsidies specifically for the semiconductor industry under this legislation, with a significant portion flowing to TSMC.

However, this factory, which is supposed to spearhead U.S. semiconductor self-reliance, has been stumbling from the start. The completion date has been repeatedly delayed, and now mass production is expected to begin only in 2025. Why is the United States, which possesses the world's best semiconductor technology and industry scale, struggling with just one fab?

The world's number one semiconductor country, the U.S., already has customers lined up

U.S. President Joe Biden attending the equipment installation ceremony at TSMC's Arizona factory in November last year. [Image source=Yonhap News]

It is definitely not due to a lack of technology, equipment, or demand. The U.S. still holds the world's number one semiconductor industry and owns the majority of foundational patents and technologies related to semiconductors.

TSMC, the world's largest semiconductor foundry, also holds the largest number of EUV lithography machines from ASML, and the U.S. is home to Applied Materials (AMAT), the world's largest semiconductor production equipment company. Therefore, there are no concerns about the supply chain for parts.

Moreover, American companies eagerly awaiting the opening of the Arizona fab have already lined up. Major semiconductor design players like Apple and AMD have declared their intention to place orders with TSMC's U.S. branch.

What the U.S. lacks is not semiconductor technology but general industrial talent

Inside Samsung Semiconductor Factory. A wafer container (FOUP) hanging from the ceiling is seen moving. [Image source=Yonhap News]

The problem is not advanced semiconductor equipment or technology. The factory itself is the issue. Regarding this, TSMC Chairman Mark Liu admitted during the Q2 earnings conference call that "the Arizona fab is facing difficulties in construction due to a shortage of skilled workers."

When discussing semiconductor fabs, the equipment that usually receives the most attention includes specialized semiconductor production devices like EUV lithography machines. These cost billions of won per unit, are manufactured by only a few companies, and are always subject to supply instability.

However, in the fab construction process, 'general industry' is just as important as these specialized devices. For example, today's fabs are filled with small rails used to transport FOUPs (special containers for storing and moving wafers).

Numerous precision motors and measurement sensors are also used inside EUV lithography equipment, which is essential for semiconductor production, and managing this component supply chain requires experts in precision machinery.
[Image source=Yonhap News]

Robotic equipment used to adjust the position of semiconductors and for packaging must move to precisely designated locations without even a fraction of an error, and to reliably perform such tasks, ultra-precision joint electric motors and sensors are required.

Meanwhile, the interior of the facility must always be clean because even a single microscopic dust particle can affect production yield. Therefore, devices that reliably supply ultrapure water and special pipes through which gases flow are abundant inside the fab. Furthermore, since even a single stoppage of the fab requires restarting the entire process from the beginning, power supply systems are arranged redundantly in double or triple layers.

The equipment used in fabs is not limited to the semiconductor industry alone. It requires bringing in specialized equipment from various industries such as machinery, electrical and electronics, and chemistry, and deploying experts from these industries who can manage and handle the supply chains of these diverse components. In other words, fab management is actually closer to general industrial technology than semiconductor technology.

What the U.S. lacks is not semiconductor engineers. In terms of semiconductor technology, the U.S. is undoubtedly the world's number one. However, compared to 'fab powerhouse' countries like Taiwan, Korea, and China, the U.S. is absolutely lacking in general industrial technicians with experience working in semiconductor facilities. This is why Chairman Liu of TSMC took the bold step of planning to deploy 600 of the company's engineers from Taiwan to the Arizona fab.

'Father of Taiwan Semiconductor' Morris Chang foresaw the situation a year ago

Founder of Taiwan TSMC, Chang Chung-Mou (Morris Chang)
[Image source=Yonhap News]

This issue was already predicted by Morris Chang, the founder of TSMC and known as the 'Father of Taiwan's Semiconductor Industry.' Last year, in an interview with local U.S. media, he strongly criticized the Biden administration's efforts to strengthen semiconductor manufacturing capacity as "a futile effort." He cited "severe labor shortages and high labor costs" as reasons.

He also predicted that the limited industrial talent pool in the U.S. would increase the overall fab construction costs. Chang said, "Manufacturing semiconductors in the U.S. costs 50% more than in Taiwan," and called "building foundries in the U.S. a wasteful endeavor."

Even if the Arizona fab opens and begins mass production in 2025, problems will persist. For TSMC to make a profit from the U.S. fab, the initial investment costs must be passed on to customers. This means that chip prices from TSMC in the U.S. will have to be higher than those from TSMC fabs in Taiwan or Japan. Consequently, the price competitiveness of U.S.-made electronics will weaken.

Ultimately, for U.S. TSMC to stabilize yields and secure the human and material resources necessary to maintain the fab long-term, the U.S. government will need to continue providing support.

However, the maintenance costs of the fab are by no means trivial. Over $30 billion has already been invested in building the Arizona fab, and even more money will be required to introduce new equipment and upgrade the factory in the future. It is uncertain whether the Biden administration, and the administrations that follow, will continue to write blank checks to TSMC until the long-cherished goal of 'U.S. semiconductor self-reliance' is achieved.

Clearly, the U.S. still possesses the world's number one semiconductor industry, but whether it is a wise strategy to bring back 'chip production,' which has long been globally divided, back to domestic soil remains a question mark.