Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chipmaker, is facing a class-action lawsuit filed by current and former employees over accusations of “anti-American” discrimination. The lawsuit comes as TSMC embarks on a major expansion in the U.S., a move supported by billions of dollars in federal funding under the CHIPS and Science Act.
TSMC’s Growing Presence in the U.S.
Headquartered in Hsinchu, Taiwan, TSMC manufactures high-performance chips for major companies like Apple and Nvidia, riding a wave of growth fueled by the AI boom. The company reported $10 billion in profits last quarter. In 2020, TSMC announced a $65 billion plan to build three semiconductor fabrication plants (fabs) in Phoenix, Arizona, promising to create thousands of U.S. jobs and bolster America’s semiconductor industry.
To facilitate this expansion, TSMC secured $6.6 billion in grants and $5 billion in loans from the U.S. government through the CHIPS Act, which was designed to stimulate domestic chip production. However, TSMC’s reliance on Taiwanese workers has sparked tensions, with employees alleging discriminatory practices favoring Taiwanese nationals over American workers.
The Allegations of Discrimination
The lawsuit, initially filed in August by Deborah Howington, a former talent acquisition director at TSMC, claims that non-Taiwanese employees faced harsher scrutiny and fewer opportunities than their Taiwanese counterparts. Howington alleges that TSMC’s leadership, which is predominantly Taiwanese, fostered a workplace culture that favored Taiwanese hires and violated U.S. employment laws. Over a dozen former employees, including U.S. citizens and foreign nationals, have joined the class-action suit, reinforcing claims of preferential treatment for Taiwanese workers.
Language Barriers and Exclusion
One of the key allegations centers around TSMC’s preference for Mandarin proficiency. The plaintiffs argue that important meetings and documents were often conducted in Mandarin, creating significant challenges for non-Mandarin-speaking employees. This language barrier reportedly hindered employees’ ability to perform their duties effectively, particularly during training sessions held in Taiwan. In one instance, a manager allegedly recommended an employee learn Mandarin through a language app.
Additionally, plaintiffs claim that TSMC used a mix of Mandarin and English, dubbed “Chenglish,” to exclude non-Mandarin speakers from critical information. This practice was reportedly acknowledged by TSMC’s head of compensation, Jen Kung, during an internal meeting.
Controversial Hiring Practices and Visa Issues
The lawsuit also raises concerns over TSMC’s hiring practices, alleging that the company deliberately recruited Taiwanese workers for U.S. positions. Howington claims that TSMC used an “Asian headhunter” to identify Taiwanese candidates for roles in Arizona. Another plaintiff alleges that TSMC hired a Taiwanese worker in the U.S. by offering his underqualified girlfriend a job as a construction safety engineer.
In addition, TSMC has faced accusations of undermining U.S. labor standards. Some contractors claim that the company tried to expedite visas for hundreds of Taiwanese workers, potentially displacing local union jobs in the process.
Cultural and Workforce Challenges in Arizona
As TSMC expands in Phoenix, it has encountered cultural and professional differences between U.S. and Taiwanese workers. TSMC’s founder, Morris Chang, previously explained that the company’s reliance on Taiwanese workers was due to a lack of skilled manufacturing talent in the U.S. By 2023, more than half of TSMC’s 2,200-person workforce in Arizona was from Taiwan, which further fueled tensions among employees.
The lawsuit also claims that TSMC provided exclusive benefits to Taiwanese workers, such as healthcare services offered by Banner Health at a wellness center created for Taiwanese employees. One plaintiff alleged that TSMC employed a Taiwanese doctor who was not licensed to practice medicine in the U.S.
Impact of Federal Funding and the Future
Despite the controversy, TSMC’s Arizona facility has begun test production, with the company expecting to start full-scale chip manufacturing early next year. The company reported that its Phoenix plant achieved a 4% higher yield than comparable facilities in Taiwan, suggesting the project is on track.
However, the lawsuit may complicate TSMC’s access to federal funds under the CHIPS Act, as the U.S. government has tied funding disbursements to strict milestones. Additionally, changes to the CHIPS Act are possible as the Biden administration winds down and former President Donald Trump potentially returns to office.
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