(Bloomberg Opinion) -- Less than three years after Wisconsin won a beauty contest to lure Taiwanese manufacturer Foxconn Technology Group to the state, local leaders and voters have been left with buyers remorse. Founder Terry Gou’s stated plans to build a $10 billion plant making flat screens were illogical from the start, and taxpayers there now realize it.
There’s another Taiwanese company that might be looking for a new American foothold. And this time, such a project makes complete sense.
Taiwan Semiconductor Manufacturing Co. is the world’s most important chip company. It makes high-end components using the best technology for clients including Apple Inc., Qualcomm Inc., Nvidia Corp. and Advanced Micro Devices Inc. Yet it produces the bulk of its chips at three locations in Taiwan with additional capacity in China. TSMC has barely any footprint in America, owning one old factory in Washington state which it bought 20 years ago.
U.S. national security concerns, protectionis, and a growing need to diversify have led me to conclude that a new American facility for TSMC is inevitable. A plan is now under discussion, but not yet confirmed, according to a report by the Wall Street Journal this week.
The only question — beyond when, and how much — is where TSMC will put it.
State governors need to pay attention. They’ve been burnt before, or at least Wisconsin’s Scott Walker has. His decision to push ahead with the Foxconn facility in 2017, at the cost of up to $3 billion in taxpayer-funded subsidies, is a major reason that the Republican governor lost reelection the following year.
When then-presidential candidate Donald Trump started talking up a renaissance in U.S. manufacturing in 2016, Foxconn’s Gou put his team to work. The company is famous for assembling iPhones using hundreds of thousands of factory workers, mostly in China. As he built his empire, Gou accumulated decades of experience pitting local and national governments against each other with the promise of jobs and economic prosperity. Quite often, the plans never came to fruition, no matter how willing the locals were to make him a sweetheart deal.
Within months of Trump’s victory, Gou had governors of rust-belt states — including Michigan, Ohio, Pennsylvania, Illinois and Indiana — eager to land what was described as a once-in-a-generation opportunity. In the end, Wisconsin’s package convinced Foxconn to break ground in Racine County as preparation for a massive flat-panel display factory that would provide 13,000 manufacturing jobs.
I wrote back then, many times, that these plans didn’t add up. Flat screens aren’t native to American industry and the country lacks the trained personnel to staff such a facility. There’s already a global oversupply and little chance of strong growth. The product is too fragile to ship long distances. Foxconn has since scaled back its plans and failed to hit some employment targets required to receive incentives.
But just 60 miles away from Foxconn’s Taipei headquarters sits TSMC, a company that would be a much better fit for the U.S. With tensions rising between Beijing and Washington, and the Covid-19 pandemic highlighting the risks to America having much of its technology supply chain overseas, TSMC is facing increasing pressure to boost its U.S. presence.At first thought, California might seem the obvious place to host a new factory. After all, that’s where TSMC’s largest clients are based. Ironically, given that it’s home to Silicon Valley — a name derived from the metal used to make integrated circuits — the state has relatively few chip manufacturing facilities. The big names of three decades ago have either merged, or gone fabless — meaning they design without making their own chips.
In fact, America’s semiconductor production sector is spread across at least a dozen states around the country, according to my analysis of company data and press reports. (1)That could make a new TSMC facility in the U.S. up for grabs. And if making high-end display panels was a bad fit for Wisconsin, a chip factory fits well in the current and future structure of American industry.
To this day, the U.S. remains the global leader in semiconductor design, development and manufacturing, with its universities churning out the best electrical and electronics engineers. TSMC founder Morris Chang is an alumnus of the Massachusetts Institute of Technology and Stanford, while the current chairman, Mark Liu, got his Ph.D from the University of California, Berkeley.
Exactly how many jobs a U.S. fab might create is hard to predict. Earlier this year, Liu told investors that any factory there would deploy the company’s most advanced technologies, which work best at scale.
As a comparison, TSMC employs over 10,000 people at its Tainan facilities, which utilize leading-edge manufacturing processes for Apple’s iPhone chips, and expects to add another few thousand in coming years. Given that semiconductor manufacturing engineer salaries in America can top $100,000, luring even half that number of jobs would be a boon for any state.
The eagerness with which communities chased Amazon.com Inc. for the e-commerce company’s second headquarters shows that many local leaders are as eager to chase high-paid employment as they are factory jobs.
With the prospect of the world’s eighth-largest tech company by market value looking for a new place to set up shop, U.S. governors are likely to find themselves back in the chase.
(1) Data was collated from company statements, annual reports, and press reports for the past 5 years.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.
For more articles like this, please visit us at bloomberg.com/opinion
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.