Futures

Morris Chang’s Sobering Insights at TSMC Arizona Fab Ceremony Highlight Semiconductor Challenges Ahead, (from page 20221218.)

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Summary

The recent “tool-in” ceremony for TSMC’s new fab in Arizona featured prominent attendees including CEOs from Apple, Nvidia, and AMD, as well as President Biden. However, the most impactful speech came from TSMC founder Morris Chang, who declared that globalization and free trade are nearly dead, a reality that affects the semiconductor industry significantly. He highlighted the challenges TSMC faces, such as talent shortages and rising costs, as the new Arizona facility will likely produce chips at a much higher cost than those from Taiwan. Chang emphasized that this event marks the “end of the beginning,” indicating that substantial work remains ahead. His remarks, largely overlooked by the media, underscore the complexities and realities of establishing semiconductor manufacturing in the U.S. amid changing global dynamics.

Signals

name description change 10-year driving-force relevancy
Decline of Globalization Morris Chang’s speech suggests that globalization and free trade are nearing their end. Transition from a globalized economy to localized production and supply chains. In ten years, we might see an increase in localized manufacturing and reduced reliance on global supply chains. Rising geopolitical tensions and economic nationalism are driving the shift towards localization. 5
Talent Shortage in Semiconductor Industry TSMC struggles to find qualified American talent, leading to reliance on Taiwanese engineers. Shift from reliance on local talent to increased international hiring and training. In a decade, we may see a more integrated global talent pool in the semiconductor sector. The need for specialized skills in semiconductors is outpacing local workforce availability. 4
Rising Costs of Manufacturing Chips produced in Arizona may be significantly more expensive than those made in Taiwan. Increase in production costs due to local manufacturing versus overseas production. Consumers may face higher prices for tech products as manufacturing costs rise. Increased operational costs and the need for onshoring are driving up prices. 5
Cultural Shift in Corporate Operations TSMC’s adaptation to American corporate culture reflects changing operational strategies. From a globalized operational model to one that embraces local cultural nuances. Corporate strategies may increasingly reflect local cultural practices in global operations. The need for companies to align with local cultures to succeed in new markets. 4
Shift to Onshoring and Friendshoring The move from offshoring to onshoring and friendshoring in manufacturing. A change in manufacturing strategy from global sourcing to regional partnerships. In ten years, we could see a landscape where most manufacturing is done closer to the consumer market. Geopolitical stability and economic factors are influencing this shift. 5

Concerns

name description relevancy
Decline of Globalization Globalization and free trade are perceived as being in decline, which could lead to increased economic isolationism. 5
Rising Costs of Production The shift to onshoring may result in significantly higher production costs, impacting consumer prices and inflation. 4
Talent Shortage in Semiconductors The inability to find sufficient qualified American engineers could hinder the operations of semiconductor fabs in the US. 5
Economic and Political Instability The changing geopolitical situation may disrupt supply chains and economic stability, affecting global trade dynamics. 4
Cultural and Operational Challenges Cultural differences and training requirements for American employees pose challenges that could delay operational readiness. 3
Dependency on Foreign Expertise The reliance on Taiwanese engineers for training in American facilities indicates a long-term dependency on foreign expertise. 4
Inflation and Cost of Living Persistent inflation could be exacerbated by increased production costs and supply chain disruptions stemming from reduced globalization. 4

Behaviors

name description relevancy
Shift from Globalization to Onshoring The transition from globalization and offshoring to onshoring and friendshoring in semiconductor manufacturing. 5
Investment in Talent Development Companies investing heavily in training local talent, often overseas, due to shortages in skilled professionals. 4
Focus on Cost Implications of Local Manufacturing Increased awareness and discussion around the higher costs associated with domestic manufacturing compared to overseas production. 4
Cultural Adaptation in Business Practices Adapting traditional practices to fit local expectations, such as changing terminology for ceremonies. 3
Increased Political Engagement in Industry Greater involvement of government officials and politicians in the semiconductor industry, signaling its strategic importance. 4
Awareness of Supply Chain Vulnerabilities Recognition of and planning for equipment and supplier shortages in semiconductor manufacturing. 4
Realistic Expectations in Industry Progress A shift towards acknowledging the hard work required post-initial investment in new facilities. 3

Technologies

description relevancy src
The establishment of semiconductor fabs in the U.S. to reduce reliance on global supply chains and enhance domestic production. 4 0fce5ae3e73cafb8739ab8c2c63ebad5
Shifting manufacturing back to the U.S. and allied nations to mitigate risks associated with globalization. 4 0fce5ae3e73cafb8739ab8c2c63ebad5
Long-term training programs for engineers to bridge the talent gap in semiconductor manufacturing within the U.S. 3 0fce5ae3e73cafb8739ab8c2c63ebad5
New methods to produce semiconductors at a lower cost despite rising expenses associated with onshoring. 4 0fce5ae3e73cafb8739ab8c2c63ebad5
Understanding how geopolitical shifts affect global supply chains, particularly in the semiconductor industry. 5 0fce5ae3e73cafb8739ab8c2c63ebad5

Issues

name description relevancy
Decline of Globalization Morris Chang’s proclamation about the near-death of globalization and free trade, indicating a shift in geopolitical and economic paradigms. 5
Rising Costs of Production The potential for increased costs of semiconductor production in the U.S., leading to higher prices for consumer electronics. 4
Talent Shortage in Semiconductor Industry The struggle to find qualified American engineers leading to reliance on Taiwanese talent and extended training periods. 5
Equipment and Supplier Shortages Challenges faced by TSMC in sourcing equipment and suppliers for the new Arizona fab, impacting operations. 4
Shift from Offshoring to Onshoring The trend of onshoring and friendshoring as companies pivot from traditional offshoring practices due to geopolitical concerns. 5
Cultural Integration Challenges The complexities of integrating Taiwanese and American work cultures in the semiconductor industry. 3
Long-Term Commitment to U.S. Manufacturing The need for sustained investment and commitment in American manufacturing capabilities in the semiconductor sector. 4
Inflationary Pressures from Domestic Production The potential for persistent inflation due to increased production costs in the U.S. semiconductor industry. 4