TSMC flags delays in Japan expansion while U.S. plans advance

Japan Times

3 days ago

Taiwan Semiconductor Manufacturing Company CEO C. C. Wei blamed worsening traffic snarls for delays in expanding its base in southwest Japan, even while a parallel U.S. effort races ahead.
Wei reaffirmed TSMC's commitment to spend another $100 billion to ramp up manufacturing in Arizona over the next half-decade, while saying a plan to build a second plant in Japan was experiencing slight delays. He stressed productive discussions with Donald Trump earlier this year, even after telling the U.S. president it will be "very, very difficult' for TSMC to complete the massive buildout in five years due to a shortage of skilled labor. Trump was "warm' during their exchange, Wei said.
The twin projects embody TSMC's impetus to produce abroad as geopolitical tensions rise and demand grows for Nvidia chips essential for developing AI. TSMC has long operated mostly from its home turf of Taiwan but built a plant in Japan after securing a raft of commitments and incentives from Tokyo. It then announced plans to dramatically increase its U.S. investment days after Trump took office.
TSMC's first Japan factory, which began operating last year, has been a boon to the local economy. But it's also overwhelming the community's farm-town infrastructure, causing shortages in housing and services and stretching commute times.
"We have created too big an impact on the local traffic. I have experienced that in person. For what used to take a 10-15 min drive, it now takes almost an hour,' the CEO told reporters after hosting a shareholders' meeting in Hsinchu, Taiwan, on Tuesday. "We told the Japanese government we'll delay the construction until the traffic improves. They said they'll make improvements as soon as possible.'
But Wei did not specify the length of the delay, which he characterized as minor. TSMC said in an emailed statement late Tuesday that it is starting construction of the second plant within this year, reiterating the revised schedule offered by Wei during an earnings conference in April.
The world's largest contract chipmaker sits at the heart of that technology supply chain, producing cutting-edge chips for Apple's iPhones and Nvidia's AI servers. Governments from Washington to Brussels have for years courted the company, particularly after shortages of certain types of semiconductors during the pandemic halted production of cars, smartphones, power tools, home appliances and other electronics.
TSMC's plan to build a second factory in Kumamoto Prefecture — with construction widely expected to have started in the first quarter of this year — is key to Japan's ambitions to regain leadership in semiconductors and attract engineers to an aging country.
The local community has not been able to fully absorb the sudden influx of workers from TSMC's first plant, however, even as the chipmaker's plans in the United States lowers the urgency of production in Japan.
"This will become negative for the area, for the local government, but I am most worried it will become negative for local residents,' Wei said. "So we told the Japanese government to improve the traffic first.'
In response to Wei's comments, Japan's chief government spokesman Yoshimasa Hayashi said at a regular news conference, "Heightened uncertainty in the global economy, along with challenges including the lack of domestic infrastructure and labor can lead to hesitation among private companies thinking of investing.' Tokyo recognizes the need to create an environment that attracts talent and investment from overseas, he said.
The holdup in Japan recalls earlier hitches in getting production up and running at TSMC's newest U.S. facilities in Arizona — though TSMC has made significant headway since.
There also remain questions about the longer-term outlook for AI demand. Even before Washington slapped additional tariffs on much of the world — only to roll them back shortly after — investors had questioned whether big tech firms from Microsoft to Meta will continue to buy Nvidia chips and build data centers at the same pace.
Executives on Tuesday said demand for AI chips still outstripped supply. Wei reaffirmed the chipmaker was still looking for 2025 revenue growth in the mid-20% range, an outlook it delivered during quarterly earnings calls in April. But the executive also warned that the strengthening Taiwanese dollar was pressuring its margins, even though the company expects record profit this year.
TSMC executives have stressed that demand — particularly for high-end chips critical to developing artificial intelligence — has remained resilient. That's helped reassure investors fearful of the Trump administration's escalating campaign to curtail China's tech ambitions and impose sky-high tariffs on goods around the world. For 2025, the market remains nervous about the fallout for the global economy and a sector that supplies critical components to just about every industry on the planet.
Taiwan's largest company is also reportedly evaluating building an advanced production facility in the United Arab Emirates. The project — discussed with the Trump administration — is said to be a substantial investment in what's called a gigafab, a complex of six factories similar to what TSMC is building in Arizona. On Tuesday, Wei said TSMC didn't harbor plans to build a chip fab in the region due to a lack of customers there.