It's really difficult to build a wafer fab in the United States.

Indeed, in recent years, the US "chip law" has injected a stimulant to revitalize the domestic semiconductor industry in the United States, attracting many international giants to invest and build factories. However, behind this thriving scene, the US semiconductor manufacturing industry has gradually exposed many problems. According to the Center for Security and Emerging Technology (CSET) report, the United States has one of the slowest semiconductor factory construction speeds globally. CSET investigated the construction of wafer fabs from 1990 to 2020 and found that the average time from start to production in the United States was 736 days, much higher than the global average (682 days), second only to Southeast Asia (781 days). In comparison, Taiwan is 654 days, South Korea is 620 days, and Japan is only 584 days. As of now, new wafer fab projects in the United States have been frequently delayed, with many projects progress uncertain, and the possibility of abandonment in the future is also unpredictable. The issue of talent shortage exposed by the delays is even more significant. Delays! Delays! And More Delays! TSMC's Arizona wafer fab delayed Since TSMC first announced its plans to establish a factory in the US in May 2020, TSMC has planned to build three factories in Arizona, but after four years, TSMC's first wafer fab has not produced any chips. Reviewing TSMC's factory construction plans in the US: On May 15, 2020, TSMC announced plans to build and operate an advanced semiconductor factory in Arizona with the understanding and support of the US federal government and the state of Arizona. TSMC's total expenditure (including capital expenditure) on the project from 2021 to 2029 was estimated to be about $12 billion. The factory was planned to start construction in 2021 with production expected to begin in 2024. However, on April 8, 2024, TSMC's latest announcement stated that TSMC's first wafer fab in Arizona is expected to start using 4nm technology for production in the first half of 2025, a year-long delay. On December 6, 2020, TSMC announced the construction of a second wafer fab in Arizona, originally slated to produce 3nm chips by 2026. However, this wafer fab has also been announced to be delayed, with TSMC stating that in addition to the previously announced 3nm technology, the second wafer fab will also adopt the next-generation nano-sheet transistor technology to produce the world's most advanced 2nm process technology, with production slated to begin in 2028. In February 2024, TSMC's second wafer fab in Arizona was "capped" On April 8, 2024, TSMC announced that, according to the "Chip and Science Act," it will directly provide up to $6.6 billion in funding for the construction of a third wafer fab in Arizona. With the completion of the third wafer fab, TSMC's total investment in the US will reach $65 billion, becoming the largest foreign direct investment in US history. The third wafer fab will use 2nm or more advanced technology to produce chips and is expected to start production by the end of 2030. The cultural conflicts that were so full of enthusiasm when building the factories, now cause headaches. According to the New York Times, 12 TSMC employees, including executives, stated that cultural conflicts between Taiwanese management and American workers have left both sides frustrated. TSMC is known for its strict working conditions, and it is not uncommon for people to be called to work in the middle of the night due to emergencies. But in Phoenix, some American employees have resigned after differences in expectations erupted. In addition, American employees complained about unnecessary meetings, to which TSMC reduced the frequency and number of participants in an attempt to alleviate the tension. Currently, about half of the 2,200 TSMC workers in Phoenix are imported from Taiwan. Intel's Ohio factory delayed for two years Intel is building factories in multiple locations in the US, including in Arizona, New Mexico, Ohio, and Oregon, with an expected investment of over $100 billion in the next five years. In Arizona, Intel is building two state-of-the-art semiconductor factories, with each factory expected to cost $15 to $20 billion; in New Mexico, Intel will invest $3.5 billion in its New Mexico factory to produce its advanced semiconductor packaging technology, including Intel's breakthrough 3D packaging technology Foveros; in Ohio, Intel will invest over $20 billion to build two new state-of-the-art factories, the largest private sector investment in the state's history; in Oregon, Intel plans to invest billions to expand and modernize its Oregon factories. Due to market challenges and slow government funding, in a report submitted to Ohio government officials on March 1st of this year, Intel stated that production at its two wafer fabs in Ohio would be delayed by at least two years from the original plans. The report indicated that the two semiconductor chip factories in Columbus will not be completed until 2026 or 2027 and will not start operations until 2027 or 2028. Source: Intel Ohio Incentive Investment 2023 Annual Report During the groundbreaking ceremony in September 2022, Intel announced that the two factories will be operational in 2025. Intel's Ohio project is a total investment of $20 billion, but the report showed that Intel has already invested $1.5 billion, with a contracted commitment of $3 billion, making the total investment $4.5 billion, a quarter of the total investment. September 9, 2022, US Representative Joyce Beatty, Intel CEO Pat Gelsinger, President Joe Biden, Ohio's First Lady Fran DeWine, and Governor Mike DeWine on the outskirts of Columbus learning about the construction progress of Intel factories (source: cleveland) Samsung's Taylor factory delayed for two years In 2021, Samsung announced the construction of a semiconductor cluster in Taylor, Texas, including two advanced logic wafer fabs and an advanced packaging facility, with an investment of at least $17 billion, making it Samsung's largest investment in the United States to date. Since 197...Since starting operations in the United States 8 years ago, Samsung has invested over 47 billion dollars in the country. It is expected that the Taylor factory will begin mass production of 4nm chips in the second half of 2024.But on April 30 of this year, at Samsung's quarterly earnings conference, Samsung announced that the start of production at the Taylor factory project has been pushed back from the second half of 2024 to "possibly 2026." On April 15, 2024, the US Department of Commerce signed a non-binding preliminary memorandum of terms (PMT) with Samsung Electronics to provide $64 billion in chip subsidies to Samsung. This will drive Samsung's reinvestment in the region with an additional $40 billion. Samsung also further clarified that the Taylor ecosystem will include two advanced logic foundries dedicated to mass production of 4nm and 2nm process technologies, a research and development factory dedicated to developing and researching leading production node technologies, and an advanced packaging factory for 3D high-bandwidth memory and 2.5D packaging. Upstream suppliers' factories are also on hold Building a wafer fab requires a lot of chemicals, equipment, and materials. After TSMC and Intel announced plans to build factories in the US, many chemical and material manufacturers in the supply chain also came together to build production facilities, including chemical and material manufacturers LCY Chemical, Solvay, Chang Chun Group, Kanto-PPC, and Topco Scientific, who have purchased land in Casa Grande, southeast of Phoenix, not far from Intel and TSMC wafer fabs, to build facilities. Nikkei Asia reported earlier this year that the construction of these facilities, crucial for building a complete chip supply chain, has been put on hold or significantly reduced, indicating that the challenge of rebuilding the US chip supply chain is greater than expected. Most affected companies blame project delays on skyrocketing construction materials and labor costs, as well as a shortage of construction workers. Material suppliers have stated that the cost of building a fab in Arizona is four to five times higher than in Asia, and the profit margins for chemical suppliers are lower than for chip manufacturers, making them more sensitive to cost increases. In addition, the slower-than-expected expansion of Intel and TSMC, along with the fact that local demand does not require as much local supply, further complicate matters. For the chemical industry, economies of scale are essential for economic viability. Compared to the complex wafer fab, material production facilities can be built more quickly, meaning they can wait to build until customers are ready. While material facilities are eligible for subsidies under the US chip law, according to the US Department of Commerce process, financial support is only provided to material and chemical suppliers after subsidy decisions are made for chip manufacturers. Therefore, they have chosen to delay their construction plans and ship chemicals to the US to meet local demand. Applied Materials is a global semiconductor equipment leader and the largest US semiconductor equipment supplier. In August, according to Bloomberg, Applied Materials' long-awaited research center grant application was rejected. This underscores the challenge that material and equipment companies face in obtaining subsidies. Who received the most chip subsidies? Among the companies currently receiving chip subsidies, Intel is undoubtedly the largest beneficiary. The 2022 Chip Act plans to allocate over $52.7 billion to support US semiconductor research, manufacturing, and workforce development. Of this, $39 billion is earmarked for direct subsidies to semiconductor manufacturers. On March 20, the US Department of Commerce signed a non-binding preliminary memorandum of terms with Intel, planning to provide $8.5 billion in direct funding subsidies and $11 billion in federal loan guarantees under the Chips and Science Act to promote its semiconductor projects in Arizona, New Mexico, Ohio, and Oregon. On February 19, 2023, the US government announced a $1.5 billion grant to Global Foundries for the construction of a new semiconductor factory in Malta, New York, and to expand production in Burlington, Vermont. It also provided $1.6 billion in loans. On April 8, 2024, the US Department of Commerce announced a $6.6 billion direct funding subsidy to TSMC and a $5 billion low-interest government loan to support TSMC's construction of three new chip factories in Arizona. On April 15, the US Department of Commerce also announced a $6.4 billion direct subsidy to Samsung to support its computer chip manufacturing and research industry cluster in Texas. On April 25, Micron Technology announced a $6.14 billion direct funding to build two DRAM wafer fabs in New York and a new DRAM wafer fab in Idaho. On July 26, outsourcing semiconductor packaging and testing supplier Amkor Technology announced a $400 million direct funding support and $200 million loan. Amkor Technology announced plans in November 2023 to build its first US domestic OSAT facility in Peoria, Arizona. Amkor Technology expects to invest about $2 billion and employ about 2,000 employees in the new facility. Once completed, this will be the largest outsourced advanced packaging and testing facility in the US. It is worth noting that the US plans to allocate a total of $1.6 billion in packaging funding. In addition, Microchip Technology received a $162 million government grant to double the production of mature node semiconductor chips and MCUs at its two US factories. Chip subsidies have not significantly affected the slow pace of US factory construction. Building a wafer fab requires long-term guarantees of resources such as land, water, electricity, and talent, and it remains unclear when these subsidies will materialize. The biggest challenge facing US wafer fab construction The biggest challenge in building wafer fabs in the US is the labor shortage. This includes two types of talent: construction workers and technical staff needed to operate the wafer fabs. According to McKinsey's analysis, the US has not built wafer fabs on a large scale in over twenty years, and there are few domestic builders with the expertise to complete these specialized projects.The required experience, skills, and expertise. In addition, semiconductor companies must also compete with companies from multiple industries (including residential) for various types of construction workers (from earthwork specialists to skilled electricians), and the labor market in the United States is already very tight.Once the construction of the wafer fab is completed, it will face a shortage of employees. Whether it is local manufacturers or foreign wafer fabs, their wafer fab construction sites are relatively concentrated. For example, TSMC and Intel both built fabs in Arizona, USA. The reason Arizona and Texas attract investment is because they already have a wafer fab ecosystem, and the local governments have always provided incentives and helped coordinate this process. In addition to huge incentives, Ohio is becoming an ideal location, for example, Samsung's investment in a fab in Columbus exceeds 20 billion US dollars, and New York State also provides incentives to encourage wafer fab construction. Other states attracting investment include Indiana, New Mexico, Oregon, Utah, and Virginia. The concentration of wafer fabs also intensifies the competition for talent. According to a new study by McKinsey, based on the investments announced in the United States, there is far more investment than the current available talent supply. By 2032, to rapidly expand the US semiconductor industry, total public and private investment will exceed 250 billion US dollars. This investment will bring more than 160,000 new job vacancies in engineering and technical support positions, as well as additional vacancies in related construction process positions. McKinsey also pointed out that although about 1,500 engineers join the semiconductor industry each year in recent years under the promotion of chip acts, they only account for 3% of the engineering graduates entering engineering positions. In contrast, by 2029, it is expected that the demand for semiconductor engineers will reach 88,000, indicating a potential talent gap. If there are not enough technical personnel and engineers, factories will not operate at full capacity. In turn, the productivity of manufacturers will also decline, which may raise the selling price of chips. In response, the United States has also launched some young talent development programs, such as: Purdue University leads an academic program called SCALE, funded by the Department of Defense, which aims to train students from 22 universities to become microelectronics engineers, hardware designers, and manufacturing specialists. Samsung Austin Semiconductor Company cooperates with the Taylor Independent School District to cultivate valuable skills for future careers and provide internship opportunities for students. Micron Technology is cooperating with 11 universities (6 in the United States and 5 in Japan), costing 60 million US dollars, planning to provide cleanroom experiential learning and memory-related research to 5,000 students annually. The Michigan Economic Development Corporation (MEDC) is investing 3.6 million US dollars to promote semiconductor training and education, distributed to four higher education institutions in the Detroit metropolitan area: Oakland University, University of Michigan, Washtenaw Community College, and Wayne State University. Additionally, MEDC has provided 838,000 US dollars to Michigan Technological University in the Upper Peninsula of Michigan to expand its semiconductor training and education through microcertificate courses. In addition, there are some short-term technician training programs, such as: Maricopa County Community College District in Arizona plans to train 4,000 to 6,000 technicians through cooperation with Intel and Taiwan Semiconductor Manufacturing Company. These two companies have made significant investments in semiconductor manufacturing plants. Oregon and Washington counties also support Portland Community College partnering with Intel, offering a ten-day paid training course for semiconductor technicians. Michigan has provided 1.5 million US dollars to the SEMI Foundation to support job seekers and attract semiconductor talent through registered apprenticeship programs. GlobalFoundries is partnering with Hudson Valley Community College and SUNY to offer an 18-month full-time paid apprenticeship program at its manufacturing base in Malta, New York, providing on-the-job training and courses funded by SUNY. Although these crash courses can provide temporary relief, chip factories still need a large number of high-tech talents. These highly skilled talents are more critical. In fact, McKinsey estimates that considering the current growth rate and forecasted demand, by 2029, the potential talent gap in the semiconductor industry may reach about 59,000 to 146,000 workers in the engineering and technical labor force. The lower end of the forecast range represents the complete realization of the estimated support projects of the CHIPS Project Office, while the higher end figure reflects the situation that may occur when the projects or funding levels do not meet expectations. In conclusion With such a great effort, how will the semiconductor manufacturing level of the United States be? According to SIA, it is expected that by 2032, the United States' share of global semiconductor production will increase from the current 10% to 14%, which is still far from the 37% 30 years ago. The goal of the US semiconductor manufacturing still has a long way to go.