Taiwan Semiconductor Manufacturing Co (TSMC) and at least five suppliers to Intel have postponed building plants in Arizona, a sign that rebuilding the US chip supply chain is proving more difficult than expected, according to Nikkei Asia.
Chemical and materials manufacturers LCY Chemical, Solvay, Chang Chun Group, Chang Chun Group, KPPC Advanced Chemicals (Kanto-PPC) and Topco Scientific had announced plans and purchased land to build facilities in Arizona after TSMC and Intel, the world’s two largest chipmakers, launched multi-billion dollar investments in the state.
However, several chip industry executives briefed by Nikkei Asia said that the construction of these facilities, which are vital to building a complete chip supply chain, has been suspended or significantly scaled back.
In some cases, the delays are expected to be temporary, while in others the projects will be reviewed later and there is no clear timeframe for when they will be operational again.
Many of those affected blame the delays on the rising cost of building materials and labour, as well as a shortage of construction workers. Investment pouring into the state for a wide range of industries, including chips and automobiles, is straining the construction sector.
Suppliers also cited slower-than-expected progress on expansions at Intel and TSMC for the delays.
The fact that several suppliers have slowed their projects shows that the problem is not caused by one or two companies, but is more structural.
Three chip materials executives told Nikkei Asia that the cost of building a plant in Arizona was four or five times higher than in Asia and ‘several times’ higher than they had previously expected.
LCY Chemical CEO Vincent Liu said his company would ‘adjust the pace’ of the Arizona plant, citing rising costs. Instead of rushing to build a production facility, LCY, a supplier to TSMC, Intel and Micron, will initially ship chemicals by sea to the US to supply its US-based customers. “When it comes to chemicals, it is critical that you have economic scale to have economic efficiency,” Liu said.
Belgium’s Solvay, one of the world’s leading suppliers of high-purity hydrogen peroxide used in chipmaking, has postponed construction of its Arizona plant for later review, sources familiar with the matter said. The sources cited cost concerns as well as the longer-than-expected wait for its main customers Intel and TSMC to expand production.
Chang Chun Group, another leading producer of semiconductor-grade hydrogen peroxide, has significantly scaled back construction of its new plant in Arizona. The Taiwanese chemical group has started building part of the plant on a much smaller scale than planned. A source familiar with the matter said the costs were ‘several times’ higher than expected.
KPCT Advanced Chemicals, a joint venture between Kanto-PPC and Chemtrade, has also postponed the construction of a high-purity sulphuric acid plant in Arizona. Topco, a leading distributor of chemicals and materials, has suspended its planned logistics centre in Arizona, a company executive told Nikkei Asia.
“The key factor is that local demand does not yet require a lot of local supply. So there’s no rush for us to spend resources so quickly. … It’s not just the plant itself. We have to make some additional investments to build roads and connect water and electricity around our campus,” he said.
All five companies have made plans and purchased land in Casa Grande, southeast of Phoenix. The location is attractive because it is relatively close to the world’s two largest chipmakers: a 30-minute drive from where Intel is expanding its facilities in Chandler, and just over an hour’s drive from TSMC’s facility in northwest Phoenix.
