Kyodo via AP Images
The TSMC fab under construction in Phoenix, Arizona, in December of last year
As temperatures blow past 115 degrees in Phoenix, union electricians at the construction site of chipmaking giant Taiwan Semiconductor Manufacturing Company (TSMC) are feeling double-crossed.
TSMC has complained for months that its second plant, located at the northern outskirts of America’s fastest-growing city, is delayed by a costly labor crunch. Last month, the company announced plans to send in 500 or more workers from Taiwan to speed the construction of the sprawling semiconductor foundry, which aims to churn out leading-edge chips by 2026.
The company told a local news outlet that it is bringing E-2 visa holders to the site, and said the total number of workers to be dispatched had not been determined. In an earlier statement to the Prospect, the company said, “There will be no impact to our U.S.-based hiring, or construction personnel onsite.”
Asked last week about the issue on Good Morning Arizona, Sen. Mark Kelly (D-AZ) said, “I’ve spoken to the U.S. CEO of TSMC specifically about the jobs, and that it’s important that these jobs are for Arizonans. They are bringing in a small group of individuals to do some training.”
Yet local union representatives say workers are already feeling the impact of the company’s non-union recruits. The Phoenix electricians’ union, IBEW 640, said it suspects the company has been clearing out union workers to replace them with overseas arrivals.
INTEL AND TSMC ARE RACING to build advanced semiconductor foundries in the Valley of the Sun. Both offer electricians $5 an hour in “incentive pay” above the negotiated $33.65 an hour that workers receive when hired through union contractors. The incentive pay comes with conditions—for example, if a worker misses a day of work due to sickness, she is docked incentive pay for the week.
On Monday, July 10th, union electricians at TSMC were told that their incentive pay would be eliminated, according to two union representatives. On receiving the news, they said, at least 50 union electricians decided to leave and seek work elsewhere. Multiple job sites in the area have put out calls for work, including a nearby data center that recently broke ground.
One week later, the representatives said, union electricians at TSMC were told that incentive pay would be reinstated. TSMC then offered a union contractor 25 non-union employees recruited from Taiwan to help solve their new labor shortage, according to the representatives, which the contractor refused, they said, since union contractors only use workers dispatched from the union hall.
TSMC rejected a project labor agreement with local unions, a deal unions say would have given them greater incentive to train a new force of union construction workers.
A representative of the electricians’ union, who asked not to be named, said he feels the abrupt elimination and reinstating of incentive pay was a strategy to replace union workers with foreign recruits. “What it did was, it created a labor shortage, and by creating a labor shortage, now they conveniently walk up and say, well, you guys can’t manage the work, so here’s 25 guys,” he said.
Aaron Butler, president of the Arizona Building Trades and business manager of the pipefitters union, which also has a large presence at the fab, said they have seen “lots more” Taiwanese workers onsite in the past two weeks.
Kelly’s office did not reply to a question on whether the senator assisted TSMC or its suppliers in obtaining visas. “Senator Kelly and his team have met with Phoenix-area labor leaders about the TSMC worksite and raised their concerns directly with the TSMC Global Chairman and the CEO of TSMC Arizona. Senator Kelly is committed to ensuring Arizona workers benefit from this project,” a spokesperson said in a statement.
FOR MONTHS, TSMC HAS STRUGGLED to recruit enough workers. The company rejected a project labor agreement (PLA) with local unions, a deal unions say would have given them greater incentive to train a new force of union construction workers in the region. TSMC founder Morris Chang is an avid opponent of labor unions, and has spoken publicly about his role averting an organizing drive at Texas Instruments.
Although TSMC and Intel both offer the same wage and benefits packages to union electricians, union representatives told the Prospect that Intel treats people better, so it has an easier time recruiting.
The electricians’ union representative predicts recruiting challenges will remain, unless TSMC raises incentive wages. Last week, he said, the IBEW 640 union hall had a call out for 120 journeyman wiremen, and nobody available to take them.
“It’s been this way for two years. Our scale is too low, and right now it’s too hot. You’re not going to get somebody from Nebraska to come to Phoenix, when it’s 120 degrees outside,” he said.
The pipefitters, which have the largest presence onsite and a higher pay scale than the electricians, have had less trouble meeting work calls, according to Butler.
But many job sites in Phoenix are facing an uphill battle in recruitment, given the high local demand for work, middling pay, and sweltering heat. Monday marked the 18th consecutive day temperatures in Phoenix exceeded 110 degrees, as the Southwest bakes under a record-breaking heat dome.
Rather than lifting wages to speed recruiting, however, TSMC is bringing in non-union workers from abroad. Its workforce challenges and vocal complaints could also, ironically, help it wring more subsidies out of the CHIPS Act, which makes available $52 billion in federal subsidies for foundries. TSMC is counting on as much as $15 billion in subsidies from the CHIPS Act, in combined tax credits and grants, according to The Wall Street Journal.
Last week, TSMC announced that its gross profits in the second quarter of this year were between 52 and 54 percent.
The company also enjoys extraordinary market power. In June, TSMC overtook 60 percent of market share in contract chip manufacturing. TSMC makes chips for technologies that have generated significant interest in recent months, including Nvidia’s graphics processing units for ChatGPT, the artificial-intelligence chatbot. It is also a contract chipmaker for Apple, Qualcomm, and other top producers of consumer electronics.
Todd Achilles, a former Hewlett-Packard executive, researches semiconductor market structure for the American Economic Liberties Project, a think tank that promotes competition. He was previously an executive at a Taiwanese consumer electronics company. Interviewed by the Prospect, Achilles argued that TSMC’s widely reported concerns over the challenges of building in the U.S. are intended to extract more generous government treatment.
“They’re completely positioning,” Achilles said. “They are an incredibly disciplined company. They’re trying to grind out all the costs they can in a U.S. fab.”
A spokesperson for TSMC declined to comment for this article.
The Prospect’s reporting on the implementation of the Biden administration’s industrial policy is supported through funding from Omidyar Network.
