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Wednesday, February 22, 2023

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Inside Taiwanese Chip Giant, a U.S. Expansion Stokes Tensions - The New York Times

Inside Taiwanese Chip Giant, a U.S. Expansion Stokes Tensions

"Employee doubts are rising about Taiwan Semiconductor Manufacturing Company’s $40 billion investment in an Arizona factory.

A banner saying “Made in America” hangs between American and Arizona flags on the side of a yellow building. Several mechanical lifts are on the expansive property.
Taiwan Semiconductor Manufacturing Company is upgrading and expanding a factory it is building in Phoenix, a vital project for U.S. tech strategy.Adriana Zehbrauskas for The New York Times

By John Liu and Paul Mozur

John Liu and Paul Mozur, who are based in Seoul, interviewed dozens of semiconductor experts on the geopolitics of Taiwan’s chip making.

Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced computer chips, is upgrading and expanding a new factory in Arizonathat promises to help move the United States toward a more self-reliant technological future.

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

Internal doubts are mounting at the Taiwanese chip maker over its U.S. factory, according to interviews with 11 TSMC employees, who declined to be identified because they were not authorized to speak publicly. Many of the workers said the project could distract from the research and development focus that had long helped TSMC outmaneuver rivals. Some added that they were hesitant to move to the United States because of potential culture clashes.

Their concerns underline TSMC’s tricky position. As the biggest maker of chips that power everything from phones to cars to missiles, the company is strategically important with highly coveted technical know-how. But caught in a deepening battle between the United States and China over technological leadership, TSMC has tried to hedge its bets — only to find that its actions are creating new kinds of tensions.

Its factory expansion in the northern outskirts of Phoenix is meant to bring advanced microchip production closer to the United States and away from any potential standoff with China. Yet the effort has stoked internal apprehension, with high costs and managerial challenges showing how difficult it is to transplant one of the most complicated manufacturing processes known to man halfway across the world.

The pressure for the Arizona factory to succeed is immense. Failure would mean a setback for U.S. efforts to cultivate the advanced chip manufacturing that mostly moved to Asia decades ago. And TSMC would have spent billions on a plant that did not produce enough viable chips to make it worth the effort.

TSMC initially pledged $12 billion toward the Arizona project and increased that to $40 billion last year.T.J. Kirkpatrick for The New York Times

“TSMC’s investment in the U.S. from a business perspective makes no sense at all,” said Kirk Yang, chairman of the private equity firm Kirkland Capital and a former tech analyst, citing lofty costs. He added that TSMC might have been forced to set up a factory in the United States because of political considerations, but “so far, the Phoenix project has yielded very little benefit for TSMC or Taiwan.”

The Arizona project is TSMC’s first major concession to rising global concerns in recent years about the geopolitics of chip production, driven partly by fears over China’s hostile posture to Taiwan and over a chip shortage.

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

Nina Kao, a TSMC spokeswoman, did not directly address the internal concerns over the Arizona investment. But in an email, she said the decision on the U.S. factory location had been based on various factors, including customer demand, market opportunity and the chance to tap global talent.

Ms. Kao added that TSMC was strengthening its training to integrate overseas talent into its corporate culture. The company will “actively listen and provide change where needed,” she said.

Chips, which are made from silicon wafers like this one, are a foundational technology and help power computers, refrigerators, phones and many other items.Lam Yik Fei for The New York Times

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

The project is challenging. In an earnings call last month, TSMC said the U.S. construction could be at least four times the cost in Taiwan, driven by labor expenses, permits, regulatory compliance and inflation. Wendell Huang, TSMC’s chief financial officer, said the American 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 a fabrication plant, or factory. She added that the company still anticipated robust gross margins over the long term.

TSMC also needs suppliers close by to provide the Arizona plant with raw materials, equipment and critical parts. Yet some suppliers that are trying to join it there said they were experiencing labor challenges and high costs.

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

An American worker pausing outside a TSMC factory in Tainan, Taiwan. Some Taiwanese employees said they were concerned about cultural differences with U.S. workers.Lam Yik Fei for The New York Times

Michael Yang, chairman of the CTCI Corporation, an engineering and construction contractor for the Taiwanese chip giant, said the Arizona factory’s construction cost was “far beyond” his client’s expectation. On top of rising inflation, the chip maker is competing with Intel — which is also expanding in Arizona — for skilled labor and construction equipment, he said.

“When we reported our quotation in the beginning, the client replied: ‘Are you insane?’ But that’s just the way it is,” Mr. Yang said.

Some TSMC engineers said they were concerned about how the Arizona factory would blend American and Taiwanese employees. In Taiwan, engineers work long hours and weekend shifts, joking that they “sell liver” to work for the chip manufacturer, 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 had thought about joining the company’s overseas expansion drive but lost interest after realizing he would likely have to pick up the slack for U.S. hires.

“The most difficult thing about wafer manufacturing is not technology,” he said. “The most difficult thing is personnel management. Americans are the worst at this, because Americans are the most difficult to manage.”

Three TSMC employees who trained American engineers said it was difficult to standardize practices among them. While Taiwanese workers unquestioningly follow what they are told to do, American employees challenged managers, questioning if there might be better methods, they said.

Some Americans struggled when assigned multiple tasks, sometimes rejecting a new assignment instead of working harder to complete everything, one TSMC engineer in Arizona said. Taiwanese workers believe that those who work in Phoenix will shoulder greater responsibilities than their American colleagues, eight employees said.

The Tainan chip factory. TSMC’s founder said in the past that Taiwan provided the company with advantages that couldn’t be matched in the United States.Lam Yik Fei for The New York Times

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

In the late 1990s, Morris Chang, the company’s founder, pushed an ambitious overseas expansion plan and created a chip-making subsidiary, WaferTech, in Washington State. Despite pledging to build multiple factories there, Mr. Chang stopped at one after “a series of ugly surprises,” including high costs and a shortage of skilled labor, he said in a podcast with the Brookings Institution last year.

Mr. Chang has questioned the U.S. effort to reshape the global semiconductor supply chain, saying at a public forum in 2021 that the advantages in Taiwan underlying TSMC’s success could not be replicated in the United States.

In the Brookings Institution podcast, he also argued that the $52 billion in U.S. government subsidies earmarked by the CHIPS Act, a federal funding package to stoke domestic production of advanced chips, would not be enough to jump-start the industry. He called it an “expensive exercise in futility.”

But at TSMC’s announcement of the Phoenix factory expansion in December, Mr. Chang appeared to have come around. This time, he said, the company is “far more 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.

“The most difficult thing about wafer manufacturing is not technology,” said Wayne Chiu, a former TSMC worker. “The most difficult thing is personnel management.”Lam Yik Fei for The New York Times"
Inside Taiwanese Chip Giant, a U.S. Expansion Stokes Tensions - The New York Times

Tuesday, February 21, 2023

Sci-fi publisher Clarkesworld halts pitches amid deluge of AI-generated stories | Artificial intelligence (AI) | The Guardian

Sci-fi publisher Clarkesworld halts pitches amid deluge of AI-generated stories

"Founding editor says 500 pitches rejected this month and their ‘authors’ banned, as influencers promote ‘get rich quick’ schemes

The chatbot ChatGPT on a device
Since the release of ChatGPT last year pushed AI language models into the mainstream, the rate of rejections at Clarkesworld has rocketed. Photograph: Hollandse Hoogte/REX/Shutterstock

One of the most prestigious publishers of science fiction short stories has closed itself to submissions after a deluge of AI-generated pitches overwhelmed its editorial team.

Clarkesworld, which has published writers including Jeff VanderMeer, Yoon Ha Lee and Catherynne Valente, is one of the few paying publishers to accept open submissions for short stories from new writers.

But that promise brought it to the attention of influencers promoting “get rich quick” schemes using AI, according to founding editor Neil Clarke.

In a typical month, the magazine would normally receive 10 or so such submissions that were deemed to have plagiarised other authors, he wrote in a blogpost. But since the release of ChatGPT last year pushed AI language models into the mainstream, the rate of rejections has rocketed.

In January, Clarke said, the publisher rejected 100 submissions, banning their “authors” from submitting again. In February to date, he has banned more than 500.

“I’ve reached out to several editors and the situation I’m experiencing is by no means unique,” he wrote. “It does appear to be hitting higher-profile ‘always open’ markets much harder than those with limited submission windows or lower pay rates.

“It’s clear that business as usual won’t be sustainable and I worry that this path will lead to an increased number of barriers for new and international authors. Short fiction needs these people.

“It’s not just going to go away on its own and I don’t have a solution.”

Closing submissions is a drastic move. Until a solution is identified, the magazine is not considering stories from authors.

“We will reopen, but have not set a date,” Clarke said on social media. “Detectors are unreliable. Pay-to-submit sacrifices too many [legitimate] authors. Print submissions are not viable for us.

“The people causing the problem are from outside the [science fiction and fantasy] community. Largely driven in by ‘side hustle’ experts making claims of easy money with ChatGPT. They are driving this and deserve some of the disdain shown to the AI developers.”

Generative AI technology is also causing unrest further afield than fiction circles.

Image generation, with tools including Midjourney, Dall-E and Stable Diffusion, has seen similar controversies, with the Colorado state art fair unknowingly awarding first prize in its “emerging digital artists” category to an image created by Midjourney – although the prize money was received by Jason Allen, who had typed the prompt into the AI tool and entered the output in the fair under his name."

Sci-fi publisher Clarkesworld halts pitches amid deluge of AI-generated stories | Artificial intelligence (AI) | The Guardian