U.S. memory chip giant Micron Technology has unexpectedly put the construction of its planned high-end memory factory, Fab 11E, in Taoyuan, Taiwan, on hold for the time being.
The plant was set to receive an investment of approximately $4.5 billion to meet the rapidly growing demand for HBM (High-Bandwidth Memory) memory chips for AI accelerators from Nvidia and others starting in late 2027/2028.
What happened?
The reason for the abrupt halt in construction is a sharp labor dispute over wages and working conditions with the local union in Taoyuan:
* Profit-sharing demands: While Micron was able to reach an agreement with the union at its larger plant in Taichung, the employee representatives in Taoyuan are demanding transparency and fixed rules for profit sharing—specifically, demands for up to 15% of operating profit in cash are on the table.
* Lack of planning certainty: Micron fears legal uncertainties and a watering down of existing agreements. To avoid creating a fait accompli in Taoyuan without long-term, stable contracts, management has pulled the emergency brake for the time being.
* No impact on ongoing production: The existing DRAM and HBM production lines in Taiwan (which account for about 60% of Micron’s global DRAM capacity) continue to operate without disruption.
A Stress Test for the AI Boom
The incident at Micron may be just the beginning and vividly demonstrates that even in the realm of AI, the sky is not the limit, and that the recent sell-off has causes far deeper than just the U.S. Democratic victory. It’s safe to assume that in the coming months, other AI equipment suppliers and tech giants will come under fire from various quarters—whether due to fundamental limits on capacity growth, infrastructure bottlenecks, or simply because more and more players are demanding their share of the massive pie.
In my opinion, there will be increasing pressure on margins in the coming months—from investors (backlash against excessive Capex and negative FCF) to clients (renegotiations and searches for alternatives, investment reluctance) and all the way down to the suppliers. Just imagine it for a moment—it’s almost perverse: Nvidia uses memory chips from Micron; Micron already sells these components with a margin of around 70%, and Nvidia sells its finished product with an additional 70% margin on top of that. This is essentially reminiscent of a Ponzi scheme that will have to be reined in sooner or later, and that’s exactly what the market will be keeping a very close eye on in the coming months.
By the way, what an outrageous audacity on the part of the workers—after all the hype about billion-dollar promises, they suddenly want a piece of the fat spoils instead of obediently letting themselves be phased out via an AI prompt. 😉
