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At least five suppliers to TSMC and Intel’s chip production facilities in Arizona have delayed construction of their facilities due to labor shortages and soaring construction costs, as reported by Nikkei Asia.
Why it matters: The move highlights difficulties the US will face in setting up a domestic chip supply chain, despite the government spending billions to spur the industry.
- The cost of building a chip plant in Arizona is now four or five times what it would be in Asia, according to Nikkei.
Driving the news: LCY Chemical, Solvay, Chang Chun Group, KPPC Advanced Chemicals and Topco Scientific have all announced plans to put on hold or scale back their production facilities.
- While some delays are expected to be temporary, other projects don’t have a timeframe on when they’d restart yet.
Between the lines: The companies all bought land to build facilities in Arizona after TSMC and Intel announced plans to build chip factories there.
- These facilities are vital to build a self-sufficient chip supply chain in the US.
Zooming in: The delays can be partly attributed to the billions Arizona has been able to attract in construction investments.
- The funding, in turn, has led to spiked demand for construction workers and building materials.
- Additionally, slower progress on TSMC’s and Intel’s part may have also contributed to the suppliers’ decisions.
What they’re saying: "Many materials companies are worried about investing too quickly for fear that they will have a new factory or expansion built before it is needed," Lita Shon-Roy, CEO of Techcet, a chip material research company and consultancy, told Nikkei Asia.
- "Many of the delays in building out materials factories are either waiting for CHIPS and Science Act funding or waiting to see the industry [demand] turn up more strongly."
The bottom line: Intel and TSMC have already been hit with several construction delays, for reasons from labor shortages to delays in receiving federal grants. This new issue will delay construction even further.
