As the construction of Europe’s first advanced chip factories in decades changes the supply chain, suppliers to Taiwan’s semiconductor industry plan an entry into Europe.
“We plan investments in Germany and Europe will be ours,” said Vincent Liu. He is the president and CEO of LCY Group. LCY Group supplies cleaning agents and solvents for Taiwan Semiconductor Manufacturing Co . is the largest contract chipmaker in the world.
Three other Taiwanese chemical suppliers to TSMC have also indicated that they are considering investing in Europe.
These plans show the structural changes that have been triggered by efforts made by governments around the globe to protect critical supply chains from geopolitical tensions and other disruptions and reshore the chip manufacturing.
Liu claimed that European chipmakers had become inefficient, and their supply chain atrophied due to their reliance on mature technology for many years.
He said that companies like Infineon do not use quality chemicals, because the capacity of their suppliers is outdated. They don’t realize how state-of-the art chemicals can help them increase their yield rates.
The European Chips Act provides subsidies to the industry to encourage investment and to respond to similar government support in the US, China and Europe.
TSMC plans to build a fabrication facility in Dresden in Germany worth over €10bn, in partnership With European chipmakers Infineon, NXP, and auto supplier Bosch. The production is expected to begin in 2027.
Intel is investing €30bn into two cutting-edge semiconductor factories in Magdeburg to the north-west Dresden. GlobalFoundries, a multinational contract chipmaker, and STMicroelectronics, a European chip company, are also planning a €5.7bn fab in France .
According to experts in the industry, Europe does not have the supply chain necessary to support such dramatic capacity increases.
A European petrochemical executive said that “Europe’s capacity has not grown for over a decade.” He added that all chipmakers in Europe used mature technology, with transistor gates at least 28 nanometres in width. The most advanced chips in production are 10nm and smaller.
The person continued, “The ecosystem and output quality of electronic grade chemicals manufacturing assets are not at all geared to supplying nodes for advanced technology such as those targeted in Dresden by TSMC or Magdeburg by Intel.”
Mark Liu, the chief executive of TSMC, said in June that the German government has promised to address the issue.
GlobalFoundries stated that chip companies in Europe are concerned about the availability of supplies. The company stated that there is a push to make more bulk materials available.
The person said that sulphuric acids, which are used by chipmakers for cleaning and etching in large quantities, must be imported from Asia, as there isn’t enough in Europe of the right quality. Isopropyl Alcohol, required for wafer washing during chip production, is also often short-supplied.
The European fabs can work with a relatively low-grade IPA. Ineos is Europe’s largest supplier and has two IPA plants in Germany, Herne and Moers. These factories were built in 1959, and respectively, 1936 and 1935.
LCY and Japan’s Tokuyama, the only two companies that produce the chemicals for the most advanced semi-conductors after decades of concentrated chip production in east Asia. Tokuyama stated that it may consider Europe in 10-20 years but Asia is its primary focus for the short term.
Liu, from LCY, visited Germany two week ago to lobby the government for support of chip supply chain companies. He said that Infineon, and other European chipmakers, had not been able to provide incentives for modernising manufacturing processes in the past because their main source of profit was from designing chips.
TSMC on the other had a specialism in manufacturing chips using designs from third parties and focused solely on reducing defects to increase profitability.
Liu stated that “once TSMC enters, they will demonstrate, and they will begin to understand what a big difference this makes.”
According to the European chemicals executive, the loss of advanced supplies capabilities applies to nearly all materials and chemical in the semiconductor value chains for Europe.
“Europe is today a net importer of key electronic grade chemical products.” To change this and become more competitive, it will take a long time to achieve. It will also require a large amount of capital investment in Europe.
Infineon didn’t respond to a query about the impact of TSMC Dresden fab on Infineon’s manufacturing efficiency or its supply chain. Ineos stated that it is actively involved in the development and production of ultra-high purity chemicals.