TSMC Kumamoto Plant Faces Three Major Challenges, Moving Supply Chain to Japan Tested
United Daily News, February 23, 2024
TSMC Short of Talent, Taiwan-Based Supply Chain Faces Competition Challenges
The Taiwan Semiconductor Manufacturing Company (TSMC) opened a fabrication plant in Kumamoto Prefecture, Japan, which faces three major challenges, and its supply chain also confronts a survival test after moving to Japan. Many believe that TSMC’s Kumamoto plant will reduce Taiwan’s global semiconductor market share. As TSMC continues to expand investment in advanced manufacturing processes in Taiwan, Japan may leverage TSMC’s expansion in Kumamoto to gain the world's leading position in the control of key materials such as silicon wafers, photoresists, electronic imaging micro-mirrors, etching equipment, and semiconductor chemicals. The expansion of the Taiwan-Japan collaboration will play a facilitating role in promoting Taiwan's continued global leadership in advanced manufacturing processes or advanced semiconductor packaging solutions.
Nevertheless, despite the opportunities brought by Taiwan-Japan collaboration in the semiconductor industry, it also presents many challenges. For example, while TSMC managed to attract local talents in Japan to join its company after significantly raising salaries, TSMC will continue to expand in the future, and the problem of talent shortage in Japan is bound to be more serious than in Taiwan as Japanese young people are unwilling to enter the semiconductor industry.
In addition, the Japanese government provides TSMC with significant subsidies with the purpose of boosting the growth of the local supply chain. TSMC may find it difficult to directly relocate its Taiwan-based supply chain to Japan in the early stages. For example, TSMC has recently been actively promoting the local procurement of wafer cassettes. In the future, these wafer cassette orders may still be divided among the Japanese companies Shin-Etsu, Dainichi, and MIRAI, and the American company Entegris. It may be difficult for Taiwanese suppliers such as Guden Precision to cut a market share.
Furthermore, the current semiconductor subsidies provided by the Japanese government mainly focus on TSMC instead of its supply chain. Talents have been sucked away by TSMC and their salaries have been increased significantly. Under this circumstance, Taiwanese suppliers will face significant challenges in following TSMC's move to establish a presence in Japan.
Three Challenges for TSMC Kumamoto
Ray Yang, research director at the Science and Technology International Strategy Center of the Industrial Technology Research Institute (ITRI), pointed out that TSMC will face three major challenges when setting up a fab in Kumamoto, namely the potential concerns of being in an earthquake zone, international operations and production management, and the need for the Kumamoto fab to develop its own characteristics.
Yang stated that the epicenter of the earthquake which occurred in Kyushu, Japan on April 16, 2016, fell in Kumamoto. Following the earthquake, Sony, Mitsubishi, and Renesas all halted production in response.
Given Japan's inherent seismic location, TSMC must already have rigorous supporting countermeasures in response. When necessary, TSMC can support Japan's local and global chip demand with Taiwan's advanced manufacturing processes and sufficient production capacity.
As for international management, although TSMC's fabs in the United States and Germany do experience considerable cultural differences and management challenges compared with Taiwan, at least English remains the common language for communication in the US and Europe. In comparison, it remains to be seen whether local employees at all levels in TSMC's Kumamoto fab can successfully achieve the high-quality standards in production in TSMC's Taiwan fabs given the possible influence of language and writing barriers. If future production operations can quickly catch up with the high-efficiency TSMC fabs in Taiwan, the Kumamoto fab will undoubtedly become a crucial touchstone for TSMC's future international expansion.
Yang believes that although Japan's important academic and research institutions still have international influence and power of discourse in some semiconductor fields, observing from the field of logic components and advanced manufacturing as TSMC's development core, the United States and European countries have long continued to make huge efforts and invest R&D resources in these forward-looking technologies. In comparison, Japan fails to catch up with the scientific research layout and progress of important academic research institutions in the United States and the European Union.
In other words, the future long-term development of TSMC's American and German fabs will have considerable opportunities to fully leverage the outstanding semiconductor forward-looking scientific research systems and talents in the United States and the European Union, especially in the field of logic IC, and in turn develop process technology and ecological system with local characteristics. In this regard, it is worth observing whether TSMC’s Kumamoto fab can fully integrate with and promote Japan’s local long-term technological research and development, especially in logic IC-related technology and even the downstream logic IC design and product application ecosystem. Also worth observing is whether it can help Japan regain an important role in the international market of logic ICs and AI chips.