Taiwan Semiconductor Manufacturing Company and three corporate partners will build a €10bn facility in Germany. The world’s biggest contract chipmaker is seeking to diversify its global operations in response to concerns about geopolitical tensions.
A statement released by the four companies on Tuesday said that the Taiwanese group had teamed up to build a factory in Dresden’s eastern part with the automotive supplier Bosch, chipmakers Infineon, and NXP. The TSMC board of directors has approved a equity investment up to €3.5bn by European Semiconductor Manufacturing Company GmbH.
According to a source familiar with the details, the German government offered TSMC €5bn in subsidies as part of its support for the project. Berlin’s economy ministry said that its support for the project was in accordance with the European Chips Act and added that they had granted an exemption permit.
Robert Habeck, the Economy Minister, who has been fighting for subsidies to attract chipmakers, stated that the factory will “make a significant contribution in securing the supply semiconductor to Germany and Europe”.
Berlin is pursuing a strategy of becoming a major European hub for the manufacture of chips, with generous support from the state. EU-wide, the EU is aiming to double its market share from 10 to 20% by the end decade.
The announcement on Tuesday follows Intel’s decision in June that it would build two wafer manufacturing sites in eastern Germany, the largest foreign direct investment ever made in Germany’s history. In May, the chipmaker Infineon broke ground in Dresden on its chip manufacturing facility.
The joint venture, which was announced on Tuesday and in which the Taiwanese firm will hold 70%, while the European partners each own a tenth, is expected to begin construction during the second half next year. The companies stated that production would begin by the end 2027. They added that the final decision on investment was dependent on the funding provided by the German government.
“This investment in Dresden demonstrates TSMC’s commitment to serve our customers’ strategic capacities and technology needs,” said CC Wei. “Europe is an extremely promising place for semiconductor innovations, especially in the automotive and industry fields.”
This decision highlights TSMC’s shift away from its almost exclusive reliance upon Taiwan as a manufacturing base, to multiple regional production hubs. Governments and chip buyers around the globe are concerned about the repercussions of a Chinese attack on Taiwan.
TSMC has defended its fab investments overseas as a necessary move to prevent global customers from switching to rivals like Intel and Samsung.
The Dresden fab is the result of a $40bn investment into a new advanced chips complex in Arizona, and a joint-venture in Japan where TSMC has built a plant to make specialty technology – a range niche chips that are manufactured using more mature technology and used in applications ranging anywhere from factory robots and wearables. Another such plant is being considered.
The German fab demonstrates the increasing importance of the automotive industry for chip demand. This is due to the growth of electric vehicles and applications that require autonomous driving. Automotive applications accounted 8 percent of TSMC revenue in the second quarter. This is up from just 2 percent three years earlier. During the peak of the global auto chip shortage in 2021, European customers requested that the company invest in local production. However, TSMC did not review the project for a long period.
The company chose to invest in Germany in a state dubbed Silicon Saxony because of the large number of semiconductor factories located there. This was despite grave concerns about a shortage of qualified workers, materials, tools, and services.
Mark Liu (TSMC Chair) cited Germany’s supply-chain ecosystem and the labour supply as “the most important points” during the company’s annual meeting in June.
He said, “There are some gaps.” “But the German Government promises to build this up in a short period of time.”
A shortage of skilled workers has caused the company to delay its production target by an additional year, until 2025.