Chipmaker’s Scramble to Build Marred by Mistakes and Injuries

Take I-17 north out of Phoenix, and you quickly hit the red dust of the Sonoran Desert. Shortly after exiting the city, you pass a series of cranes spanning the horizon. There is little indication of who owns the plot of land. But at the turnoff, a poster of a pointing Uncle Sam is mounted on the green construction fencing. In a twist on the classic war recruitment slogan, it reads: “SAFETY Starts With YOU!”

Behind Uncle Sam lies one of the largest active construction sites in North America: a two-square-mile campus that will soon churn out cutting-edge semiconductor chips, critical technologies that power nearly all electronics, from cars and children’s toys to medical devices, missiles, and iPhones. Thousands of construction workers make their way across the site daily.

The site is owned by Taiwan Semiconductor Manufacturing Company, or TSMC, one of the world’s most powerful and resolutely inconspicuous brands. It broke ground in 2021, and last December, President Joe Biden visited for a ceremony as machinery was wheeled in. With Apple CEO Tim Cook in attendance, TSMC announced a second major investment in the facility, bringing its total to $40 billion.

The announcement came directly out of the passage of the CHIPS and Science Act, which commits $52 billion to the research and production of semiconductors. Domestic fabrication plants, or fabs, are part of an effort to meet national-security goals while restoring manufacturing capacity. In the coming months, TSMC is likely to receive billions in federal support for “Fab 21” in Phoenix, with its leading-edge 4-nanometer chips ready to ship by 2024.

At the ceremony, Biden announced that Fab 21 was being “built with union labor.” Some critics, echoing complaints from semiconductor company executives, argue that labor requirements and other complicated standards imposed by the administration could doom the effort to reshore semiconductor production.

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But the debate has raced ahead of reality. I went to Phoenix to interview construction workers on-site, and found that while some union contractors have secured jobs at Fab 21, most workers at the site are non-union. Many are international migrants and out-of-state workers. The parking lot is full of Texas and Louisiana license plates.

Injuries and safety violations are rampant, workers say, and trust in the jumble of contracting managers runs low. TSMC managers have allegedly stepped in to modify contractors’ work without warning. A worker with one of the staffing agencies hiring for the facility said she has repeatedly been paid less than her salary, and colleagues have been denied paychecks.

“It’s easily the most unsafe site I’ve ever walked on,” said Luke Kasper, a representative of the sheet metal workers union, known as SMART. “I’ve been in the trades 17 years … everyone that works at the hall and out there on-site agrees that it’s by far the most dangerous, unorganized job site they saw.”

Cutting corners on safety and training in a facility as demanding as a semiconductor fab can lead to costly setbacks. It’s a lesson some rival manufacturers have learned in blood. But as the White House wrestles to revive American chip manufacturing, the challenge will be convincing a mature industry that its refusal to share benefits with workers comes with economic as well as human costs.

ACCORDING TO LOCAL LABOR REPRESENTATIVES, at least two construction workers have died at TSMC’s Arizona fab. A non-union worker using an eight-inch grinder on metal pipe removed the guard, several sources told the Prospect. The grinder got away from him and cut his leg, slicing into his femoral artery, a major blood vessel. Aaron Butler, president of the Arizona Building Trades Council, sent a letter to the White House detailing challenges at the site. In the letter, he said that the man died from loss of blood before medical help arrived.

A second worker died of a drug overdose in a Port-A-Jon toilet, Butler said in the White House letter.

In a statement, TSMC denied that any deaths have occurred. “In Phoenix, there have been zero work related fatalities since the start of this construction,” a spokesperson wrote. “We are regularly audited against known safety standards by organizations such as the Arizona Department of Safety and Health (ADOSH). TSMC also conducts its own internal audits of safety records against state and national figures. For TSMC Arizona, our safety and injury incident rates are significantly lower than state and national benchmarks.”

ADOSH said it had no reports of TSMC employees at the site suffering death, hospitalization, amputation, or loss of an eye, which they are legally required to track. However, reports would be filed with the hundreds of individual contractors on the job site. That complex reporting structure can make it hard to confirm injuries, particularly when they involve migrant workers.

The Prospect was told of multiple accidents involving loads being dropped from cranes. For example, according to Butler, a piece of carbon steel pipe over 40 feet in length and weighing over eight tons was dropped from 160 feet in the air. In another incident, according to a worker who asked not to be named, a 20-inch piece of carbon steel was dropped off a crane and hit a worker.

A man in his sixties fell off an A-frame ladder and broke both of his legs, according to one person familiar with the incident. Others described at least two cases in which workers have fallen through badly marked scaffolding. One man in his twenties, on a work visa from Mexico, reportedly fell through flooring to the level below, a more than 30-foot drop.

According to one person who heard about the incident indirectly, the worker “lost his spleen, he broke his wrist, he broke five ribs, and ended up having to be in the hospital.” The worker added, “They said he was going to be OK, he will be able to go back to work. I heard he’s from Mexico and the GC or whoever was in charge of that scope was paying for him to stay in a hotel and make sure that he heals up.”

Workers also report low lighting in stairwells and on scaffolding, and tripping hazards throughout the site. Rumors of injuries and breached safety protocols spread quickly, in an atmosphere of low trust that puts employees on edge about working together.

Josh Wakeham, business director for Arizona Local 469, the pipefitters union, described one memorable incident. “People were told that there was an active-shooting drill, and they were running, and [told] to evacuate the area. So our guys got out of the area. And they found out later that it was a gas leak. And they were just trying to hide that. So no one trusts them,” Wakeham said. “It’s their culture of ‘Hey, we’re not trying to slow down any productivity, get back to work, nothing to see here.’”

In one video of the job site shared with the Prospect, fire consumes the side of a building and black smoke billows away while workers idle, unsure how to respond. “Do you have their phone numbers?” one man asks. “No service,” another answers. The person who shared the video with the Prospect said that contractors suspected welders from Greenberry, a non-union contractor, caused the fire. In a written statement, Greenberry said it was not responsible for the incident.

MOST OF THE ROUGHLY 12,000 WORKERS building the fab do not list TSMC as an employer. According to sources at the site, hundreds of different contractors have hired for specific jobs and specialties. Some of them are union-affiliated; Local 469 represents the most union workers, with around 1,300 people spread across around a dozen contractors. Overall, around 3,000 workers at the site have some form of union affiliation.

Some unions with the Arizona building trades, such as the Boilermakers and the Laborers’ International Union of North America (LiUNA), don’t have a single worker at the site. Labor leaders have been told that TSMC flatly rejects a project labor agreement (PLA), a prehire deal that would give unions guaranteed work—and, by extension, the job security they need to invest in recruiting and training thousands more union workers.

Employers frequently resist PLAs and point out that they can drive up costs, including by discouraging competition among construction firms. “Arizona is a “Right-to-Work” state and we welcome all workers,” TSMC said in a statement.

Mike Dea, business manager of the local Laborers’ chapter, said he has recently received emails from TSMC and other companies that are likely to receive subsidies from the Biden administration, but they have all resisted signing a PLA.

“Because we’re raising hell with the politicians back East, they’re now reaching out to me,” Dea said. “Companies are just meeting with us to patronize the politicians, because there’s no deals coming out of any of it.”

The lack of a PLA discourages unions from investing in training. “It’s a chicken-and-egg problem,” Butler said. Right now, the construction market is sizzling in Phoenix, but when the job market slackens or work wraps up, union jobs will slump.

Rival fabs under construction in New York and Ohio have PLAs that will deliver a generation’s worth of jobs. But in Arizona, a state long hostile to unions and reliant on migrant workers, labor conditions are business as usual. LiUNA has fought for months to secure a PLA with battery cell developer KORE Power, but “it all went cold,” Dea said. Solar photovoltaic installers in the region have also resisted PLAs.

TSMC’S MODEL RELIES ON CONTRACTORS that bring in out-of-state and migrant workers.

Linde, a chemicals company registered in Ireland, is building the oxygen, nitrogen, and argon processing part of the plant, which is critical in chip manufacturing. It brought in Louisiana-based XL Industries, a non-union contractor. (Linde declined to comment.)

For Jacob Evenson of the Boilermakers, whose membership is about two-thirds Native American, that rankles. The Boilermakers’ union hall last boomed in the 1970s, when a spree of building coal-fired power plants put over 1,500 members to work.

This year, the Boilermakers had a relatively busy spring, Evenson said, that strained their 350-member hall. They were working on outages at area coal plants, and doing maintenance work on “the fossil side,” Evenson said. The Boilermakers have not secured jobs at TSMC, however, and the outlook at projects likely to receive money from federal spending on clean energy, such as the new battery plant, does not seem promising.

TSMC is also partnering with newly created U.S. arms of United Integrated Services (UIS) and ProperSys, Taiwanese companies that helped it build its fabs in Asia. To learn more about these employers, one worker taped his conversation with an office administrator at ProperSys.

The recording was shared with the Prospect on the condition of anonymity. Posing as a potential recruiter, the worker asked the ProperSys employee whether his relatives with work visas could work on the site. “Most of our guys and women are from Taiwan. So we’re very familiar with work visas,” the administrator replied.

“If one of my people—if one of his work visas is [being processed], would he still be able to apply and get it while the work visa is coming in?” the worker pressed. “Yeah, yeah,” she said. “Like, we have a couple of people—and it all is by situation—but we do have some people who are currently on student visas here, and you know, they’ve already been hired for a job when they graduate, and get their work visa. So, upcoming visas as well.” ProperSys did not respond to a request for comment.

TSMC has told Arizona state representatives that in the U.S., they have had trouble finding skilled labor to build their clean rooms—zones where dust and contaminants must be tightly controlled—to company standards, according to a person with knowledge of the talks. The company has sought exemptions from state licensing laws to bring workers from Taiwan to build the clean rooms, the person said.

Responding to questions on its recruitment of foreign workers, a spokesperson wrote, “There is skilled expertise that we require for specific TSMC Arizona construction activities. We are bringing to Arizona select specialized talent for limited timeframes to build and ramp what will be the most advanced semiconductor manufacturing technology in the U.S. There will be no impact to our U.S.-based hiring, or construction personnel onsite.”

In the meantime, the company is relying on American staffing contractors—and learning their limitations.

A janitorial worker in her early twenties, who asked not to be named for fear of retaliation, said she came to TSMC after working at an Amazon warehouse. She was hired through the workforce contractor ABM Industries, which also staffs Amazon.

After a roughly two-hour orientation, she said, she was dispatched to sanitize the fab’s clean room. At Amazon, she had made a base rate of just under $17 an hour. As an ABM employee at TSMC, her pay rate is $21 an hour, but she said she has rarely been paid that amount. Most of her paychecks have been for the incorrect rate of $19 an hour. She said she has raised the issue with her supervisor, who tells her the company will try to address the issue, and she is saving her paychecks as proof, in order to be paid back.

She estimates about 1 in 4 of her colleagues have had pay issues with ABM. The company has a long history of payouts for wage violations. In 2021, it paid $140 million to settle a class action lawsuit brought by janitors in California who alleged that they had been underpaid.

Underpayment is not the only problem she has faced with ABM. A check-cashing company turned her down, she said, since the contractor’s checks have bounced. And there is huge uncertainty about retention. ABM just laid off around 100 of its temp workers, she estimated. That adds to job insecurity, and makes workers more reluctant to complain about being underpaid.

In a statement, ABM acknowledged the pay issues at TSMC. “We have been made aware of technical issues that initially impacted the accurate timekeeping and payment for some team members … We are actively working to ensure all team members receive their full pay owed,” a spokesperson said.

HUNDREDS OF DIFFERENT CONTRACTORS, uneven standards, and little communication between teams can cause a litany of delays and setbacks. Experienced construction workers described work culture at the fab as highly irregular.

One evening, a general foreman affiliated with the sheet metal workers union was conducting a routine after-hours site check. His crews had packed up for the day, but he found that their section of the job site was buzzing with activity.

According to Luke Kasper of SMART, who heard about the incident from one of their contractors, about a dozen Taiwanese workers were clustered around their area, “up on scissor lifts, basically cutting our ductwork out of the sky.”

TSMC engineers had earlier proposed changing the location of a wall, and asked for the ductwork to be moved. Typically, the contractor would submit a change order to move the ductwork, so the wall could be put in. But when that didn’t happen immediately, Kasper said, TSMC sent a handful of men out in the field with hard hats. Butler said he believes the crew were “office workers.”

“We’ve never seen owners just go in and touch our work, because they decided to move a wall,” Kasper said. “It basically looks like they just started on one end and started cutting hangers, and it just pretty much fell.”

At other times, when untrained teams have tackled tasks in a hurry, it has backfired.

Take the non-union contractor Greenberry. Earlier this year, workers told the Prospect, a Greenberry crew test-ran condenser water through a 72-inch pipe they had installed. Then, when they went to drain the pipe, the non-union crew forgot to add a vent, creating a vacuum.

It was like sucking the air out of a plastic bottle, workers said. The blunder caused some 110 feet of pipe to collapse, damaging structural supports and leading to delays. It is unlikely that a union contractor would have made the same error; first-year pipefitter apprentices are taught to vent pipes.

“Greenberry was not responsible for either of the incidents you identify,” the company said in a statement, referring to the pipe collapse and the fire. “Greenberry is proud of its record of safe and quality work by its well-trained staff and experienced field leaders.”

Even when work is completed without accidents, union workers say safety protocols are often flouted. “Lockout/tagout” policies are frequently ignored, one man said, referring to a safety procedure for shutting off dangerous machinery before working on it. Without warning, contractors have cut butterfly valves used on chiller and condenser water, he said, flooding the area nearby. “If someone were working on the other end, they could kill somebody,” he said.

At times, union contractors receive work, only to have it quickly reassigned to non-union competitors. Partly, he admitted, this is because non-union contractors can recruit workers more quickly for a job. But after being “de-scoped,” with a segment of the job taken away, he said, union workers are often brought back in to fix bad handiwork.

Kasper, who has worked in the trades for 17 years, compares it to a site 50 miles south, where Intel is expanding its 42-year-old chip campus, racing TSMC to begin production of its own leading-edge chips by 2024. The Intel facility is much more organized, Kasper said.

WHILE TSMC IS A NEWCOMER IN ARIZONA, American chipmakers have been arbitraging subsidies and cheap labor opportunities for decades.

In the 1960s, California-based Fairchild Semiconductor, one of the world’s first producers of silicon wafers, outsourced final assembly of its semiconductors to Hong Kong, citing low labor costs. “We had union problems in Silicon Valley,” said Fairchild’s Charlie Sporck, according to Chip War, a new history book on the industry. “We never had any union problems in the Orient.”

Internal offshoring within the U.S. also began, with Sporck placing a Fairchild facility on a Navajo reservation in New Mexico, one of the poorest states in the country. Over the next two decades, Advanced Micro Devices (AMD) and Intel overtook Fairchild, which was acquired by the oil field services company Schlumberger and run “like a heavy equipment company.”

Successors imitated Fairchild’s labor cost arbitrage and protested what they described as a thicket of red tape. After the recession of the early 1990s, Hughes Aircraft Co. left California and relocated to Tucson, Arizona, citing the high cost of doing business. The desertion sparked a crisis of confidence in Sacramento. The California Department of Commerce formed “Red Teams” aimed at paring back regulations.

In 1992, with help from state officials, Intel invested in a new $400 million fab in Santa Clara, skipping an environmental impact statement and cutting the typical permitting time from 18 to just six months. The facility was exempted from California Environmental Quality Act (CEQA) requirements.

But the next year, Intel chose to locate a new $1 billion factory, which it called the largest plant expansion in the industry’s history, in New Mexico. The state offered Intel some $114 million in tax breaks and other incentives, the Los Angeles Times estimated.

Over the same period, Taiwan was investing heavily in its own chips market, as well as enforcing domestic labor repression. TSMC’s takeoff during that period left competitors in the dust.

Industry leaders continue to emphasize the high cost of building today. Intel CEO Pat Gelsinger said in 2021 that building a new fab in “Asia” is 30 percent cheaper than building in the U.S., and China is 50 percent cheaper. But geostrategy increasingly trumps cost-cutting. In addition to its new U.S. fab, TSMC is in talks on a fab in Germany, where it will be harder to skip negotiating with labor unions.

Market structure in semiconductor manufacturing varies widely. Companies like Micron, Samsung, and Texas Instruments compete aggressively to produce memory chips, which store data. Switching costs for memory chips are low, so the moment a firm falls behind the pack, it loses market share. To remain profitable, these have developed vertically integrated business models, designing and manufacturing chips for their own electronics.

Leading-edge logic chips, by contrast, are far less commoditized. Companies like Apple, Nvidia, AMD, and Qualcomm design chips for their products and outsource production to TSMC foundries.

Samsung, New York–based GlobalFoundries, and another Taiwanese firm called UMC also produce leading-edge logic chips, but TSMC distinguishes itself by making the most advanced 3-nanometer chips with the highest yield rate. TSMC’s gross profit margins have risen steadily over the past few years to 62.2 percent in the fourth quarter of 2022.

Todd Achilles, a former Hewlett Packard executive, researches semiconductor market structure for the American Economic Liberties Project, a think tank that promotes competition. He argues that TSMC is able to maintain its wide profit margins and market power because its “fabless” clients have enormous market power of their own, so they can afford to pay big margins and pass the costs on to their consumers.

“Fabless monopolies feed the foundry monopoly,” Achilles says. “By definition, this is an uncompetitive space, because you could never support TSMC margins if it was actually a competitive market.”

IN FEBRUARY, THE NEW YORK TIMES PUBLISHED a splashy story on “internal doubts” at TSMC over “high costs and managerial challenges” at the Phoenix fab. The article was published six days before the Department of Commerce issued a highly anticipated guidance document detailing the criteria they would consider in allocating CHIPS funding to semiconductor manufacturers.

Tech executives had been hammering the administration for attaching burdensome standards to its subsidies. Former TSMC CEO Morris Chang, a passionate opponent of labor unions, told Rep. Nancy Pelosi (D-CA) that reshoring efforts are doomed to fail. Politico reported that Taiwanese executives had questioned “whether American environmental and labor laws were consistent with the goal of nurturing a sophisticated industry.”

Yet when Commerce’s guidance was published, there were few hard-and-fast rules. The department signaled that grantmaking would involve extensive back-and-forth with industry.

That’s not the case for all of the new federal investments. The Treasury, for example, has issued simple rules on qualifying for the clean-energy tax credits it administers. If you don’t use union apprentices to install clean energy, you just don’t qualify for the full tax credit.

By contrast, Commerce has retained discretion over each funding decision, and it is treating investments as part of a comprehensive economic development plan, considering supply chain linkages, university research programs, and work with local labor groups.

(The earlier version of CHIPS would have eliminated the labor debate. It mandated project labor agreements and required that firms receiving subsidies remain neutral in any collective-bargaining campaign. But those standards were stripped out before the bill was finalized.)

Unions urged Commerce to require that applicants negotiate a labor agreement, but Commerce did not make that compulsory. Even so, the business press argued that Commerce is asking for too much, zeroing in on an application question about child care.

“Even if no single standard or mandate is decisive on its own, the accumulation of them, in an industry in which we’ve already fallen ruinously behind on cost, can do real damage,” New York Times columnist Ezra Klein wrote in a criticism of what he called the new “child care mandate.”

But there is no child care mandate. Commerce tells applicants who want more than $150 million to show that affordable child care is available nearby, but it does not expect applicants to directly provide or subsidize that child care, a Commerce official confirmed to the Prospect.

Commerce lists a number of other nice-to-haves. Domestic content is not a requirement in CHIPS, but it is a consideration in funding. TSMC is currently using Teflon-coated stainless steel sourced from Asia, according to sources at the site.

TSMC expects to receive $7 to $8 billion through CHIPS, The Wall Street Journal reported, but it has continued to balk at terms attached to the money, with Chairman Mark Liu saying at an industry meeting in March that “some of the conditions are unacceptable.”

As it heads into negotiations with applicants, Commerce lacks leverage. In order to secure the domestic semiconductor supply chain, America needs TSMC in the fold. It’s easier for TSMC to leave the U.S. than for Commerce to walk away from TSMC over standards.

Achilles, who as a former tech executive ran American operations for the Taiwanese consumer electronics company HTC, doubts that TSMC faces any difficulty producing in the U.S. at substantial profit. “They’re completely positioning,” he said. “They are an incredibly disciplined company. They’re trying to grind out all the costs they can in a U.S. fab.”

CONSTRUCTION WORK IS FAMOUSLY HARD TO ORGANIZE, even without employer opposition. “The workers are all temporary,” explained historian Nelson Lichtenstein, who directs a center for labor studies at University of California, Santa Barbara. “It’s not like a factory or a Burger King where the workers are there long term.”

TSMC refusing a PLA is also a political loss for Biden. Recent investments were meant to strengthen the labor movement—and Democrats’ political case—in a state that is ground zero of anti-union laws. Nationally, labor leaders have rallied behind Biden with an early show of support for his upcoming campaign. But regional union representatives are not yet sold.

“I see zero benefit of what’s happened in the Biden administration with the IRA, [CHIPS], the infrastructure bill—any of that,” said Dea of LiUNA.

If some employees are disappointed by the jobs this national-security project is offering, that hasn’t stopped them from taking pride in the work.

By Googling “clean room,” the janitorial worker contracting for ABM learned that keeping the clean room spotless is critical to chip production—and to defense priorities. Using deionized water, harnessed and dressed in a full-body “bunny suit,” she painstakingly scrapes paint off the floor and tape residue off the floors and ceilings.

“The whole building is a ventilation system, and the floors are just one part of it, and you have to get into every crack and crevice. It’s really tedious, but it’s cool,” she said. “I love it whenever people think what I’m doing is stupid, and then I get to explain.”

Despite the uncertainty of the working conditions and the payment problems, she is glad to be involved. “I don’t know how much the president, he himself, actually knows or cares about TSMC, but it is a really cool project,” she said. “I feel lucky to be part of it.”

The Prospect’s reporting on the implementation of the Biden administration’s industrial policy is supported through funding from Omidyar Network.