Micron (MU.US) Suspends Taoyuan Plant Construction Plan: Labor Dispute Affects Critical AI Memory Capacity, Adding New Variables to Global Supply Chain

Micron Technology, Inc. (MU.US) has suspended plans to build a memory chip plant in China's Taiwan Province due to a protracted labor dispute, clouding the outlook for a key production base of critical AI components, according to people familiar with the matter. The US company has largely halted work on a factory in Taoyuan City in northern China's Taiwan Province, the people said. Executives are concerned about mounting uncertainty, including the risk that agreements reached with local unions could be overturned. Micron has informed local officials and a supplier of its plan to suspend construction in the city, the people said. Tensions between Micron and its workers have heated up this year after employees demanded higher pay and a greater share of record profits driven by the AI buildout. The potential disruption to Micron's plans in China's Taiwan Province, which produces three-fifths of the US company's conventional chips, threatens to add further strain to a market already facing a widespread memory chip shortage. Over three decades, Micron has invested nearly US$50 billion in China's Taiwan Province, and the new Taoyuan plant was slated to use top-end equipment from ASML Holding NV ADR (ASML.US) to produce high-bandwidth memory (HBM) and DRAM. While not a mega-fab by modern standards, these components are tightly linked to NVIDIA Corporation (NVDA.US) accelerators and the global AI data center boom, and are in such extreme shortage that prices are soaring. "China's Taiwan Province plays an important role in Micron's global footprint, and our current operations are proceeding as normal," Micron said in a statement, without addressing the situation at the Taoyuan site. "We are confident in maintaining business continuity for our customers." Micron reached an agreement in October with the larger of its two unions, but the company may have to renegotiate because some employees are unhappy with the terms, the people said. The construction halt raises the possibility that Micron could reconsider its broader manufacturing Hub Group, Inc. Class A plans in China's Taiwan Province, which help it compete with South Korea's Samsung Electronics, SK Hynix and China's ChangXin Memory Technologies. Micron budgeted US$3 billion to US$4.5 billion for the Taoyuan site, including the purchase of ASML Holding NV ADR equipment, one person said. Some small safety-related work is still underway at the site, but construction will then be frozen, the person added. The plant, known as Fab 11E, was scheduled to begin production in 2028. Micron is the largest foreign investor in China's Taiwan Province, and any scaling back there would be a major blow to the region. China's Taiwan Province's economy and stock market have been buoyed by the AI boom, with companies such as Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) building plants at an unprecedented pace. Yet its viability as a long-term investment destination is threatened by the risk of potential military intervention. Even as Micron considers slowing down in China's Taiwan Province, it is ramping up preparations for plants elsewhere. The company has pledged US$250 billion in US manufacturing investment, including New York state. It is also expanding in Japan and Singapore. The economic affairs department overseeing China's Taiwan Province said in a statement: "The competent authorities support the lawful agreement the company has reached with the union and will share responsibility with local government to help resolve differences and create a win-win outcome." The Taoyuan local government said it had not received notice of the construction halt, though it hopes Micron and its employees can reach consensus. The Taoyuan plant is not Micron's largest factory in China's Taiwan Province, but it is a flagship project for the US company, which has a massive presence there. China's Taiwan Province currently accounts for 60% of Micron's global DRAM (dynamic random-access memory) output, the memory format commonly used in computers and phones. The region also produces a substantial share of its high-bandwidth memory (HBM) used in AI systems. In terms of personnel, China's Taiwan Province is Micron's largest base, with 15,000 employees, or about a quarter of the company's total workforce. The Taoyuan union represents fewer than 3,000 of them, with most of the rest belonging to the much larger Taichung union. The Taoyuan union is demanding that Micron distribute 15% of its operating profit to global employees, arguing that Samsung and SK Hynix have taken similar measures. Employees also want all-cash incentives rather than partly stock-based awards, said union chairman Jerry Lin. The union is now trying to recruit members from the Taichung union to form a larger organization that could help invalidate the existing agreement and then press Micron to restart negotiations, Lin said. While Micron has not disclosed the terms of the existing agreement, the economic affairs authority of China's Taiwan Province said the deal would more than triple the average annual salary of junior engineers to NT$4 million (about US$121,450). Senior engineers would receive a threefold increase to NT$6 million. According to job site 104 Corp., the average annual salary for engineers at locally listed semiconductor companies was NT$2.58 million in 2025. Micron is confident that the agreement with the larger union is legally binding, according to a person familiar with the matter. The Taichung union chairman also acknowledged its legality but said he respects the smaller union's move to form a larger organization. Negotiations with the Taoyuan union are ongoing. "We look forward to reaching an agreement," Micron said.