<h1>The TSMC Shock: Japan’s Transformation into a Global Chip Manufacturing Hub</h1>
<p>In the small town of Kikuyo, Japan, a new era of traffic jams, skyrocketing property prices, and battles for staff has emerged, aptly referred to as “the TSMC shock.” This transformation is a direct result of Taiwan Semiconductor Manufacturing Company (TSMC) beginning the construction of its first factory in Japan five months ago.</p>
<p>”TSMC’s arrival was sudden and unexpected,” said Takatoshi Yoshimoto, the mayor of Kikuyo. “We instantly became famous, as if Kikuyo had suddenly matured overnight.”</p>
<p>Kikuyo and the surrounding Kumamoto prefecture now play a crucial role in Japan’s efforts to revive its reputation as an international chip manufacturing hub. The global demand for diversified semiconductor supplies to mitigate geopolitical risks has prompted this shift.</p>
<p>The changes in Kumamoto reflect the broader challenges faced by Japan, such as a severe labor shortage and infrastructure constraints. TSMC’s arrival is forcing the country to confront these long-standing issues.</p>
<p>”We call it the TSMC shock, but I see it as a tremendous opportunity to reshape Japanese society and economy,” said Kazufumi Onishi, the mayor of Kumamoto. “We need this kind of shock to drive change.”</p>
<h2>The Impact of TSMC on Kumamoto</h2>
<p>Kumamoto is already home to numerous Japanese chip factories, but TSMC’s presence marks a new phase in the semiconductor industry. The Japanese government offered substantial subsidies of $3.2 billion to cover half of TSMC’s construction costs, demonstrating the significance of its arrival in Kumamoto.</p>
<p>According to Kyushu Financial Group, TSMC’s entry into Kumamoto is expected to provide a boost of ¥4.29 trillion ($29 billion) to the local economy over the next decade. This will be achieved through job creation, infrastructure development, and attracting other companies to the region.</p>
<p>However, TSMC’s arrival also poses challenges for the local economy. The company’s competitive salaries have sparked higher wage expectations among employees, leading to frequent job changes and exacerbating the labor shortage in the area.</p>
<p>While TSMC’s presence is an opportunity for economic growth, local businesses need to adjust their mindset and focus on individual employee performance in the face of a shrinking workforce. Companies must learn to do more with fewer employees.</p>
<h2>Labor Shortages and Operational Challenges</h2>
<p>Addressing labor shortages through increased productivity and automation has its limits. Japan Material, a maintenance service provider frequently used by TSMC, highlights the challenges faced in securing enough workers in Kumamoto.</p>
<p>TSMC’s operations require licensed workers for specific tasks. Japan Material needs licensed staff to replace gas cylinders and maintain water systems. However, the company expects difficulties in finding qualified professionals.</p>
<p>Japan Material is negotiating to take over workers from other semiconductor-related companies that may shut down unprofitable businesses next year. This initiative aims to secure enough employees to support TSMC’s operations.</p>
<p>By the time TSMC starts production, the global semiconductor market’s anticipated rebound will further complicate the labor shortage. The ratio of job vacancies to applicants in Kumamoto is projected to rise, making recruitment even more challenging.</p>
<h2>Challenges Beyond Labor Shortages</h2>
<p>The impact of TSMC extends beyond the labor force. The town of Kikuyo is facing shortages in various areas, including roads, property, international school places, and even rice fields critical for groundwater resources.</p>
<p>Average commercial land prices in Kikuyo have already surged by 26% due to TSMC’s presence, and the single major road leading to the plant is often congested.</p>
<p>The enormous water consumption of chip plants raises concerns about water supplies. TSMC’s commitment to replenish more groundwater than it uses by flooding rice fields faces challenges due to declining rice prices and an aging farming population.</p>
<p>”Land is limited, and considering our capacity, we can’t accommodate more new companies,” said Yoshimoto. Despite the challenges, he remains optimistic, stating that TSMC’s presence is a positive force that makes Kikuyo part of a historic project.</p>
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