Taiwan Semiconductor Manufacturing Company, the world’s largest maker of advanced computer chips, is modernizing and expanding a new Factory in Arizona that promises to help the United States move toward a more self-sufficient technological future.

But for some within the company, the $40 billion project is something else: a bad business decision.

Internal doubts are growing at the Taiwanese chipmaker over its US factory, according to interviews with 11 Tsmc employees, who declined to be identified because they were not authorized to speak publicly. Many workers said the project could distract from the focus on research and development that has long helped TSMC outwit rivals. Some added that they were hesitant to move to the United States due to possible cultural conflicts.

Their concerns underscore TSMC’s delicate position. As the largest maker of chips that power everything from phones to cars to missiles, the company is strategically important with coveted technical know-how. But caught in a deepening battle between the US and China over tech leadership, TSMC tried to hedge its bets – only to find its actions creating new kinds of tension.

The expansion of its factory in the northern outskirts of Phoenix aims to bring production of advanced electronic chips closer to the United States and away from any potential standoffs with China. Still, the effort has stoked internal apprehension, with high costs and management challenges showing just how difficult it is to transplant one of the most complicated manufacturing processes known to man to the other end. of the world.

The pressure for the Arizona plant to succeed is immense. A failure would mean a setback for US efforts to cultivate advanced chip manufacturing that shifted mostly to Asia decades ago. And TSMC would have spent billions on a factory that didn’t produce enough viable chips to make it worthwhile.

“TSMC’s investment in the United States from a business perspective doesn’t make sense,” said Kirk Yang, chairman of private equity firm Kirkland Capital and a former technology analyst, citing high costs. He added that TSMC might have been forced to set up a factory in the United States due to political considerations, but “so far, Project Phoenix has brought very little benefit to TSMC or Taiwan. “.

The Arizona project is TSMC’s first major concession to growing global concerns in recent years about the geopolitics of chip production, driven in part by fears about China’s hostile stance toward Taiwan and a shortage of chips.

The chip giant, which has long had almost all of its factories in Taiwan, is now also building a factory in Japan. European policymakers have rolled out plans to attract a TSMC factory, and the company is close to making a decision on that factory, two people with knowledge of the matter said.

Nina Kao, a spokeswoman for TSMC, did not directly address internal concerns about the Arizona investment. But in an email, she said the decision on where to locate the factory in the United States was based on a variety of factors, including customer demand, market opportunities and the ability to tap into talent. global.

Ms. Kao added that TSMC is strengthening its training to integrate foreign talent into its corporate culture. The company “will actively listen and make changes if necessary,” she said.

TSMC announced the Arizona plant in May 2020, initially pledging $12 billion to it. In December, the company increased that to $40 billion, with plans to upgrade the factory with more advanced chipmaking technology — but not the most advanced. The factory is expected to start producing microchips by 2024, and the company said it will add a second factory to the site later.

The project is demanding. In an earnings call last month, TSMC said construction in the United States could cost at least four times the cost in Taiwan, due to labor expenses, permits, regulatory compliance and inflation. Wendell Huang, chief financial officer of TSMC, said the US investment could hurt TSMC’s profitability this year.

“TSMC recognizes that there is a cost gap between fabs in Taiwan and those overseas,” Ms. Kao said, using shorthand for fab or factory. She added that the company still expects strong long-term gross margins.

TSMC also needs nearby suppliers to supply the Arizona plant with critical raw materials, equipment and parts. Still, some vendors trying to join have said they face labor issues and high costs.

Calvin Su, president of Chang Chun Arizona, a chemical supplier that has invested in its own $300 million plant in Casa Grande, Ariz., about an hour’s drive from Phoenix, said the cost of building its factory was 10 times that of Taiwan. The costs were fueled by a lack of knowledge of U.S. building regulations and permits, as well as an insufficient supply of production materials, he said.

Michael Yang, president of CTCI Corporation, an engineering and construction contractor for the Taiwanese chip giant, said the cost to build the Arizona plant was “far beyond” his client’s expectations. In addition to rising inflation, the chipmaker is competing with Intel — which is also expanding in Arizona — for skilled labor and construction equipment, he said.

“When we flagged our quote at first, the client replied, ‘Are you crazy?’ But that’s the way it is,” Yang said.

Some TSMC engineers said they were concerned about how the Arizona plant would combine American and Taiwanese employees. In Taiwan, engineers work long hours and weekend shifts, joking that they are “selling liver” to work for the chipmaker, they said. Such sacrifices may be less appealing to employees in the United States, they said.

Wayne Chiu, an engineer who left TSMC last year, said he thought about joining the company’s overseas expansion but lost interest after realizing he would have to probably take over for hiring in the United States.

“The hardest thing about making wafers isn’t the technology,” he said. “The most difficult thing is personnel management. Americans are the worst at this because Americans are the hardest to deal with. »

Three TSMC employees who trained American engineers said it was difficult to standardize practices between them. While Taiwanese workers no doubt follow what they’re told, American employees have challenged managers, wondering if there might be better ways, they said.

Some Americans struggled to be given multiple tasks, sometimes rejecting a new assignment instead of working harder to complete everything, said a TSMC engineer in Arizona. Taiwanese workers believe those working in Phoenix will take on greater responsibilities than their American colleagues, eight employees said.

TSMC’s first US investment more than two decades ago also served as a cautionary tale.

In the late 1990s, Morris Chang, the company’s founder, launched an ambitious overseas expansion plan and established a chip manufacturing subsidiary, WaferTech, in Washington State. Although he pledged to build several factories there, Mr Chang stopped at one after “a series of nasty surprises” including high costs and a shortage of skilled labor, he said. he stated in a podcast with the Brookings Institution last year.

Chang questioned U.S. efforts to reshape the global semiconductor supply chain, telling a public forum in 2021 that the advantages in Taiwan that underpin TSMC’s success could not. not be reproduced in the United States.

In the Brookings Institution podcast, he also argued that the $52 billion in U.S. government grants provided by the CHIPS Act, a federal funding program intended to spur domestic production of advanced chips, would not be enough to revive the industry. ‘industry. He called it “an expensive exercise in futility”.

But when TSMC announced the expansion of the Phoenix factory in December, Mr. Chang appeared to have recovered. This time, he said, the company is “much better prepared.”

In an email to The New York Times, Mr. Chang said he stood by his remarks in last year’s podcast and at the December event in Arizona. He declined to comment further.