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TSMC’s US push and chaos at ‘iPhone city’

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Hello everyone, this is Cissy from Hong Kong.

After an unseasonably long summer — the effects of climate change on the city are becoming more and more apparent — the weather here turned chilly almost overnight a few days ago. As the year draws to a close, I’m reminded of my reporting trip to Foxconn’s Zhengzhou facility four years ago on a bitterly cold winter day, when the world’s largest iPhone assembler actually offered me a job as a production line worker for $1.70 per hour.

I travelled there because I had heard there was an exodus of workers due to weaker demand for the smartphones assembled inside the vast 1.4mn-sq-m facility. Chinese factory workers tend to resign when there is a lack of overtime opportunities, because their basic salary is so low.

As a result, Foxconn was desperate for new workers. When I was trying to interview some employees and recruiters around the facility, one former worker looking to be rehired invited me to join the facility. Out of curiosity, I joined the interview queue with him. There were few requirements for being a production line worker at Foxconn. As long as you were educated to the age of 15, between 16 and a half and 40 years old, and not Uyghur or Tibetan — which was stated publicly in job agencies’ advertisements — you were welcome to apply.

After showing the agency my ID card and answering a few questions, the recruiter told me that I could start training immediately and begin work soon.

It was a hilarious experience. I am curious if I were to visit any facilities today that are desperate for workers, would they offer me a job, too?

Desert chips

Washington’s efforts to bring critical semiconductor production home are bearing fruit. Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, announced this week that it will triple its investment in Arizona, where it is constructing a $12bn chip factory, to $40bn. The expanded investment will go toward building a second, even more advanced facility in the desert state.

The Arizona facility is TSMC’s first cutting-edge plant in the US in more than two decades, and it will start churning out some of the world’s most advanced chips as early as the end of 2023, with Apple set to be its most important first-wave customer, writes Nikkei Asia’s Cheng Ting-Fang. Chip developer Nvidia is expected to follow suit.

Other potential buyers include Advanced Micro Devices (AMD), one of the top US chip producers, and Xilinx, the top programmable chip developer in the world that AMD purchased in a $35bn deal.

Further underscoring the importance of TSMC’s new plant to US chip ambitions, President Joe Biden attended a ceremony earlier this week marking the installation of the first equipment at the Arizona facility, his first visit to the state as president.

Manufacturing in the US will be 50 per cent more expensive than in Taiwan, according to TSMC founder Morris Chang. But Chang, regarded as the father of Taiwan’s chip industry, stressed his company’s commitment to making its US operations a success in a speech that also predicted the imminent “death” of globalisation and free trade.

Inside ‘iPhone city’

The world’s largest iPhone assembly plant is gradually returning to normal after worker protests over chaotic attempts to contain a COVID outbreak disrupted production at the 200,000-strong factory town in the Chinese city of Zhengzhou for weeks.

But a closer look by Financial Times’ reporters at the chain of events between late October and late November revealed systemic weaknesses in the way Foxconn, the world’s largest electronics contract manufacturer, and its largest customer Apple have organised iPhone production.

Key factors behind a mass walkout from the plant and the violent clashes between factory employees and police were disconnects and miscommunication between Foxconn and local government in organising quarantine and hiring.

There were similar problems between Foxconn and external partners including local officials, labour brokers and dormitory managers that contributed to a long series of past conflicts with workers.

Those incidents led to little change in the 15-year history of iPhone assembly operations in China. But since the latest disruption has caused delays in Apple’s iPhone shipments, industry insiders believe it could cause the US company to diversify assembly operations faster.

Gig economy shake-up

Singapore is asking major platform operators like superapp provider Grab, food delivery platform Foodpanda and ride-hailer Gojek to provide a stronger safety net for the 73,000 independent contractors in the industry, Nikkei Asia’s Tsubasa Suruga writes.

Workers on these platforms are part of the “gig economy” — a working style that departs from the traditional model of full-time employment in favour of task-based work facilitated online. Gig work has taken off in Singapore as demand for ride-sharing and food delivery services grows.

Treating drivers and other workers as independent contractors rather than employees helps companies keep costs down, but leaves workers with few protections. It is a situation the government thinks should change, with new regulations set to come into effect by late 2024. But workers who enjoy the flexibility of the current set-up may not be celebrating.

BYD aims for Japan

China’s BYD is entering the Japanese market, where domestic automakers have been slow to roll out electric vehicles. And the world’s largest EV maker is planning to beat rivals Nissan and Tesla in the country on price.

BYD will begin selling its first passenger electric vehicle, the flagship midsize sport utility vehicle Atto 3, in Japan from Jan. 31 for ¥4.4mn ($32,000). The price is below that of Nissan’s Ariya and Tesla’s Model 3, both of which sell for more than ¥5mn, writes Nikkei Asia’s Sayumi Take.

Atto 3’s price could drop further if the Japanese government’s subsidies for EVs continue at the same level next year, though the government has yet to reveal its plans on that front.

Japan is the world’s third-largest automobile market, with between 4mn and 5mn cars sold each year. BYD is preparing to open 22 sales outlets in Japan beginning in January, with the goal of having more than 100 stores by the end of 2025.

But the Chinese automaker is not the only one who sees an opportunity in Japan’s nascent shift to EVs: Germany’s Mercedes-Benz opened its first ever shop dedicated to electric vehicles in the Japanese port city of Yokohama this week.

Suggested reads

  1. Beijing allows US export-control checks on Chinese tech companies (FT)

  2. Huawei pushes smartwatches in Japan as U.S. sanctions bite (Nikkei Asia)

  3. China’s Envision sees next ‘net zero industrial parks’ in ASEAN (Nikkei Asia)

  4. TSMC triples Arizona chip investment to $40bn (FT)

  5. TikTok expected to escape the worst of the global ad slowdown (FT)

  6. Hate office meetings? Ricoh’s digital room helps break the ice (Nikkei Asia)

  7. From farming to medicine, rural Japan goes high-tech to get by (Nikkei Asia)

  8. Covid chaos at Foxconn iPhone plant causes 29% revenue fall (FT)

  9. Urban drone flights now legal in Japan: 4 things to know (Nikkei Asia)

  10. Tim Cook charm resolves Twitter spat yet China crisis rumbles on (FT)

#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

Sign up here at Nikkei Asia to receive #techAsia each week. The editorial team can be reached at techasia@nex.nikkei.co.jp

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