As we embark on a new U.S. presidential administration committed to reducing regulation, I revisited a The New York Times article by Ezra Klein. Klein highlights that when Taiwanese semiconductor giant TSMC constructed a chip fabrication plant in #Arizona, the costs were quadruple those in #Taiwan. Similarly, photovoltaic solar manufacturers face challenges competing with #Chinese counterparts due to the significantly higher expenses of building factories in the U.S. It also takes a lot more time to get these projects done in the U.S. than in Asia.
This raises the question: Why is it so costly and time-consuming to undertake such projects domestically?
1. High Labor and Regulatory Costs
TSMC reported that building in Arizona could be up to four times more expensive than in Taiwan, primarily due to U.S. labor costs, permits, regulatory compliance, and inflation. While each regulation may seem manageable in isolation, their cumulative effect escalates overall costs and extends project timelines.
2. Accumulation of 'Good Goals'
Klein introduces the term "everything-bagel liberalism" to describe how American policy initiatives often layer multiple commendable objectives—such as labor standards, diversity requirements, environmental reviews, and community investments—without eliminating outdated or redundant regulations. This accumulation increases complexity and expenses, making large-scale U.S. construction projects more time-consuming and costly compared to countries like Taiwan.
3. Permitting and Procedural Delays
In the U.S., construction projects must navigate a myriad of permitting processes, environmental assessments, and, in many states, additional local regulations. These procedures remain in place even for critical national security projects like semiconductor fabrication, contributing to delays and increased costs.
4. Workforce and 'Buy American' Requirements
While the U.S. strives to create well-paying domestic jobs and foster local supply chains, policies such as "Buy American" provisions and union labor agreements can inadvertently raise contractors' expenses and slow development. Emphasizing local content or diversity in hiring and contracting, though well-intentioned, adds layers of complexity to the process.
5. Comparisons to Other Sectors
Klein draws parallels to California's affordable housing crisis and large public initiatives like high-speed rail, illustrating how the accumulation of additional requirements over time—despite their good intentions—drives up costs and prolongs timelines.
In summary, the article argues that TSMC's elevated costs in Arizona stem from the U.S.'s propensity to impose numerous additional standards, reviews, and mandates on projects. While each aims to achieve a noble social or economic objective, their combined impact results in total costs far exceeding those encountered by TSMC in Taiwan.
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