“They Don’t Want To Stop At All”: Facing Shortage Shockwaves, Taiwan Semi Rushes To Build Infrastructure

In the midst of a massive semiconductor shortage that we have been documenting at length, Taiwan Semiconductor Manufacturing is rushing to try and build new facilities through the Chinese New Year in order to meet demand. 

TSMC is one of the biggest suppliers of chips to company like Apple, Google and Qualcomm. As a result of a worldwide shortage in chips that was brought on due to the pandemic, they are now rushing to try and get a new factory in the southern Taiwanese city of Tainan built. It’ll be “the world’s most advanced 3-nanometer chip production plant,” according to Nikkei. The company is also building a research and data center in Hsinchu. 

Construction the new facility will take place throughout 2021, with completion expected in 2022. 

One executive said of TSMC’s expansion: “We received a notice from TSMC that it is giving 4,000 New Taiwan dollars ($145) a day as an extra bonus for every worker willing to come during the Lunar New Year… that is literally at least double the average daily wage for front line workers. Even if that’s only roughly a few extra days of building time [during the holiday], they don’t want to fully stop at all. That shows their commitment to speed up construction and development and confidence for future demand.”

In addition to the 3nm plant, the company is also preparing to boost its capacity to make 5nm chips. These chips are using in the latest 5G iPhone 12s and new Mac core processors. TSMC wants to boost production by 70% from the end of last year. 

It’ll be resuming construction “a few days earlier” than most coming out of the Lunar New Year in southern Taiwan. TSMC is also boosting capex by $25 billion, to $28 billion, this year. 

Bill Chiu, chairman of Gudeng Precision, a TSMC supplier, said: “Construction workers across Taiwan are all attracted to TSMC’s sites as it is paying much higher wages than elsewhere… It’s really the strong pillar of Taiwan’s economy and the center of the tech ecosystem.”

One local fire safety manager said: “For electroplating specialists on construction sites, the daily wage has recently jumped from NT$6,000 to NT$12,000 a day. It’s stunning and unprecedented.”

As a result, a worker shortage has continued to intensify heading into the final quarter of 2020, one construction supervisor told Nikkei: “TSMC is a key reason… The company and its suppliers are attracting many workers from northern to southern Taiwan, while in the past year there are also many new construction projects for residential and commercial buildings in Greater Taipei. People are all fighting over labor resources. Even with higher wages, we still have a hard time finding enough workers.”

“The average daily wage for regular construction workers has risen from NT$3,000 to NT$4,000 in less than a year,” the Nikkei report noted.

The boom has taken over Taiwan – so much so that many tech executives refer to Taiwan as the “island that TSMC built”. TSMC is Taiwan’s largest company by market cap and accounts for 33% of its local stock market value and 20% of private sector investment. Taiwan’s semiconductor industry has been thrust into the spotlight this year amidst the ongoing semi shortage. 

As we documented just days ago, the semi shortage is turning into a full blown crisis. It is now being referred to as the “most serious shortage in years”, with Qualcomm’s CEO saying last week that there were now shortages “across the board”, according to Bloomberg. 

But it isn’t just Qualcomm executives speaking out: other industry leaders have warned in recent weeks that they are susceptible to the shortages. Apple said recently that its new high end iPhones were on hold due to a shortage of components. NXP Semiconductors has also warned that the problems are no longer just confined to the auto industry. Sony also said last week it may not be able to to fully meet demand for its new gaming console in 2021 due to the shortage. Companies like Lenovo have also been feeling the crunch.

Neil Mawston, an analyst with Strategy Analytics, said: “The virus pandemic, social distancing in factories, and soaring competition from tablets, laptops and electric cars are causing some of the toughest conditions for smartphone component supply in many years.” 

Mawston says that prices for some smartphone components are up as much as 15% the last 6 months.