Suppliers to Intel and TSMC's Arizona fabs now face build delays

You know where plants are much cheaper to construct? Asia

Updated Intel and TSMC face new hitches to their chip fabrication plants in Arizona with key suppliers encountering difficulties in building support facilities due to surging costs for building materials and labor.

ocotillo campus arizona

Ongoing construction at the Intel Ocotillo campus of two new semiconductor wafer manufacturing plants being built as part of the American Chips Act

The two chipmakers are both constructing semiconductor factories in the south-western state and have already faced challenges of their own. Now issues with suppliers are holding up proceedings further.

According to Nikkei Asia, several companies that provide chemicals and other materials for chipmaking have scaled back or put on hold plans to build their own plants to support Intel and TSMC in Arizona, after investing in appropriate sites.

Citing chip industry executives briefed on the matter, the report points the finger at rising costs of building materials and labor, as well as a shortage of construction workers to actually build the facilities.

The suppliers named include Topco Scientific, LCY Chemical, Solvay, KPPC Advanced Chemicals, and the Chang Chun Group.

Nikkei claims the cost of building a plant in Arizona is now four or five times what it would be in other parts of the world such as Asia and several times higher than these companies had expected to spend at the outset.

Some of the underlying causes for this could be Arizona's success in drawing investment into the state, leading to increased demand for construction workers and building materials as companies set up new sites there.

However, slower than expected progress by Intel and TSMC on their chip fabrication facilities might also be factors in delaying the supplier projects.

Intel said back in 2021 that it planned an expansion of its Ocotillo campus in Chandler with an additional two factories on the site, but construction of these is said to have proceeded slower than was expected.

The company has also seen delays to fabrication plants planned near Columbus in Ohio, which it blamed on the weakness of the semiconductor market and the slow pace of signing off CHIPS Act funding. Intel previously said it might have to delay construction of a fab at Magdeburg in Germany because of rising costs.

Taiwanese chip contract manufacturer TSMC started construction of its Arizona semiconductor fab in April 2021, and said last year it could not find enough workers to complete the building project on time - the site is now scheduled to be operational in 2025.

It is not clear what effect the construction delays being experienced by suppliers may have on Intel and TSMC's production plans. We asked the two semiconductor giants for comment, but they were not immediately available to respond.

LCY Chemical – a provider of Electronic Grade Isopropyl Alcohol (EIPA) cleaning agents – will initially supply these via sea rather than rush to build the production plant, according to Nikkei.

Intel and TSMC are expected to be among the big beneficiaries of Washington's CHIPS Act funding to subsidize the cost of building these advanced semiconductor factories in the US, with an announcement anticipated this week. ®

Updated to add on March 20:

Intel has been in touch to say: "Intel is dedicated to addressing the growing demand for semiconductors. Wafer fabrication sites typically require three to five years from groundbreaking to production, subject to business conditions and other factors.

"We are fully committed to our projects, which remain on track."

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