18,000 reasons it’s so hard to build a chip factory in America

PHOENIX – The computer chip factories rising from an empty expanse of the Sonoran Desert test the concept of immensity. The complex is under construction across 1,149 acres, an area larger than New York’s Central Park. It represents an investment of $165 billion, making it one of the most expensive undertakings on Earth.

Here on the northern edges of Phoenix stands a display of America’s reach for industrial self-sufficiency. The factories are engineered to make advanced computer chips – the brains of modern manufacturing. Those chips will power data centers that deliver artificial intelligence.

American political leaders celebrate the presence of the plants as insurance against geopolitical turmoil and disasters like pandemics. Whatever happens, the nation will have its own supply of computer chips.

But the company at the center of this enterprise – one cast as vital to national security – is not American. Taiwan Semiconductor Manufacturing Co., or TSMC, the global leader in the industry, has marshaled the investment, the people and the know-how to turn these plans into reality.

Scores of other companies, some of them American but many from East Asia, have set up their own local factories to supply TSMC with everything it needs, from chemicals and components to construction and engineering services. Collectively, they have invested an additional $40 billion in the local economy.

This is the inescapable truth behind the transformation of Phoenix into a hub for computer chips: It could never have happened without the expertise and money brought in from across the Pacific. The last major domestic chip plant came online in 2013. So the United States lacks the experience to build one without considerable help.

And even with that assistance, the experience has been tumultuous, fraught with missteps and enormously expensive. The process that has turned a blank spot on the map into what some now call the Silicon Desert underscores a defining feature of American life: A tangle of bureaucracy often hinders ambitious visions, sowing confusion, uncertainty and delay. That tends to reinforce inertia and discourage development.

At home in Taiwan, TSMC is used to moving aggressively, gaining whatever resources, personnel and government approvals are required to propel its astonishing expansion. Yet in Phoenix, TSMC and its suppliers have wrestled with the intricacies of a different system.

They have been tripped up by a confusing process to gain permits. They have struggled to find workers with needed skills. They have contended with higher costs of doing business, succeeding through force of will and vast sums of money.

Under pressure to build factories in the United States, TSMC has already completed one so-called fab – a plant now producing chips – while continuing construction of two more. It has outlined plans for three more factories at the Phoenix site, plus a pair of advanced packaging facilities. When these plans are completed, the company expects to make nearly one-third of its advanced chips in the United States.

President Donald Trump has vowed to spur a revival in U.S. manufacturing as a centerpiece of his economic plans. He has leaned heavily on tariffs as the way to force companies to set up factories in the United States and hire American workers. He has effectively bet that the allure of making goods inside the world’s largest consumer marketplace would be enough to overcome other challenges.

But the simplicity of that prescription confronts the reality that the United States lacks workers with needed skills.

And in Taiwan, TSMC and its suppliers build facilities in dedicated industrial zones that generally require one permit from a central authority. In Arizona, they must negotiate municipal, county, state and federal regulations, requiring thousands of approvals.

“We ended up establishing 18,000 rules, which cost us $35 million,” said C.C. Wei, TSMC’s CEO and chair.

Such laments stem from an extraordinary American success. Over decades, the United States has used regulation to reduce air and water pollution while enhancing workplace safety. Yet bureaucracies have grown around those rules, often in incoherent fashion.

The presence of TSMC in Phoenix reflects a reassessment of geopolitical risks. No one at its headquarters in Taiwan stared at the globe and concluded that Phoenix was the most suitable place to make chips. Rather, the company responded to its customers.

TSMC does not design chips. It makes them for businesses like Apple and Nvidia, the company at the center of explosive growth in artificial intelligence.

In recent years, TSMC’s customers have grown worried about its dependence on factories in Taiwan, a self-governing island claimed by China. What if Beijing unleashes its military to seize control, disrupting the supply of chips? With such fears in mind, TSMC has begun constructing factories around the world, including in Germany and Japan.

One of TSMC’s largest customers urged the company to set up an advanced manufacturing plant in the United States.

The Biden administration was intent on diminishing America’s reliance on faraway factories. It sought to attract computer chip manufacturers by earmarking more than $52 billion in subsidies via the CHIPS and Science Act. The funding included $6.6 billion for TSMC.

The Arizona Commerce Authority, an economic development agency, courted the company, highlighting the state’s legacy as a center of semiconductor production. Motorola began making computer chips in the area in the mid-1950s. Intel opened a fab in Chandler in 1980.

Arizona State University promoted its industry expertise and aggressive expansion plans. Over the last 15 years, the ranks of its engineering students have grown to 33,000, from 6,000.

But nothing gets built in Phoenix without reckoning with water. Shortages have prompted state and local authorities to limit development.

Chip plants require enormous amounts of water. The first three TSMC factories were expected to need a collective 16.4 million gallons per day – about as much as consumed by 200,000 homes. TSMC says its expect to draw little of that from municipal supplies. The company is building a wastewater treatment plant that it says will eventually recycle nearly all of its water.

By the spring of 2024, TSMC had committed to build three factories in Phoenix, while investing $65 billion. Then Trump returned to office, gaining the company’s commitment to more than double its plans.

Making computer chips is an industrial magic trick. Billions of microscopic transistors are crammed onto slivers of silicon using a process something like the creation of a photographic negative. Machinery casts beams of light so slender that a human hair may be 5,000 times as thick.

But installing that equipment, and getting it to work properly, requires people with specialized training and experience. Two years ago, TSMC acknowledged that it was having trouble finding local people who knew how to do it. The company brought in more than 500 experienced workers from Taiwan.

Local unions accused TSMC of breaching the spirit and rules of its federal subsidies. They urged immigration authorities to block visas for the Taiwanese workers.

The company resolved the conflict by committing to show preference to American workers. But labor disputes have continued.

A lawsuit brought by 28 former and current TSMC employees at facilities in Arizona and California accuses the company of relying on Taiwanese senior managers who sideline American workers by conducting business in Chinese while denigrating local hires.

The lawsuit depicts dangerous conditions inside the fabs. It asserts that TSMC reflexively brings in workers from Taiwan rather than investing in training local people.

TSMC declined to discuss the lawsuit. In a statement, the company said it “is committed to providing a safe, welcoming and inclusive environment for our employees.”

Arizona authorities required that the company survey its site as well, to ensure that it was free of desert tortoises. The city of Phoenix demanded that TSMC identify and replant protected species of desert flora.

When fire protection engineer David Amiri, 34, joined TSMC in June 2022, he assumed the company would value his knowledge of applicable safety codes. He had spent three-plus years as a Phoenix fire inspector.

The company had to expand the sprinkler system, he told his supervisors. This was a substantive issue of safety, he said. But the Taiwanese manager he approached dismissed his concerns, Amiri said.

“They wanted to copy in the U.S. exactly how they do it in Taiwan,” he said. “They didn’t change a single bit of their design.”

An inspector for TSMC’s insurance company later noted the defect and demanded that it be remedied, Amiri said, and the cost ran “six figures.” In June 2024, he quit in frustration.

Amkor Technology, a chip packaging company, was a missing piece to the whole puzzle. Advanced packaging takes freshly manufactured chips and fits them together for use in devices like consumer electronics.

In late 2023, Amkor announced plans to build a $2 billion plant in Peoria, a city just west of the TSMC complex. The Peoria City Council approved a development agreement with Amkor in February 2024. The plant was to be built in the middle of 320 acres slated for housing, restaurants and office space.

Residents cried foul. How was a factory compatible with the surroundings? City officials offered assurances. The tallest building would be no higher than 54 feet, they said.

Yet by January, the planned factory had doubled in height, while expanding across more than four times the initial square footage.

Amkor was under pressure to add capacity to accommodate TSMC’s growing demand for AI chips. Its investment had swelled to $7 billion.

Residents of the community jammed Peoria City Council meetings, demanding a halt to the factory and threatening legal action. Publicly, the city held firm.

Jason Beck, the Peoria mayor, pursued a deal behind the scenes by which the city bought a larger, more remote parcel via a state land auction. The company recently broke ground at the new site.

“Sometimes, things get ugly,” Beck said.

This article originally appeared in The New York Times.