TSMC Teams up with European Partners to Invest $11 Billion to Build its First German Chip Plant

BEIJING, August 8 (TiPost)— Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading chip maker for other companies, is poised to build its first chip fabrication plant in Germany as well as in the European Union (EU).

Credit：TiPost

TSMC’s board of directors approved an investment of 3.5 billion euros (US$3.8 billion) to set up a factory in Dresden, capital of an eastern German state Saxony, pending for approval of the European Commission, according to a statement on Tuesday. TSMC will run the factory in a joint venture with three European partners– NXP Semiconductors NV, Robert Bosch GmbH and Infineon Technologies AG. Four partners are expected to invest a total of more than 10 billion euros (US$11 billion) in the fab. TSMC will hold 70% of stakes in it, and other three companies will each hold 10%. The planned fab is scheduled to start production by the end of 2027 and offer automotive chips and industrial-grade chips.

The German government will dole out 5 billion euros (US$5.49 billion) to support construction of the factory, German newspaper Handelsblatt reported earlier this week. Berlin will provide up to 5 billion euros to the factory, Reuters cited officials on Tuesday.

The German governmentwas reported to sign an agreement in June to grant a subsidy package worth of 10 billion euros for an Intel Corp. plant in Magdeburg. Intel that month confirmed it planned a plant there and said its investment would be around 30 billion euros, without providing amount of the state’s financial aid. German Chancellor Olaf Scholz said Intel’s fab represents “the single largest foreign direct investment in German history.”   

Germany economy ministry announced in July that the government planned to distribute 20 billion euros (US$22 billion) to boost the country’s semiconductor industry in coming years, without specifying timeline. The money will be drawn from an off-budget fund called Climate and Transformation Fund (KTF). The plan is Germany’s latest effort to attract global chipmakers to move their production to the country. That is also the latest sign to show European policymakers’ pursuit for reducing dependency on Asian countries and regions for chips amid increasing geopolitical risks. Handelsblatt’s report said the 5 billion- euro subsidy also came from KTF.

TSMC was said in the beginning of May to discuss with Infineon, Bosch and NXP about a chip plant venture. Total investment of the planned venture was likely to be closer to 10 billion euros, which include state subsidies and would have a budget of at least 7 billion euros.

Reports since then suggested the world’s top contract chipmaker was seeking German government’s subsidies for chipmaking. Bloomberg reported in late May that TSMC was in talks with Berlin to receive subsidies for as much as 50% of construction costs for its fab factory in Germany. “So far the feeling is good,” TSMC Chairman Mark Liu commented the progress of talks about the planned factory at an annual shareholders’ meeting in June. “We are still negotiating with Germany on subsidies, how much the subsidies will be, that there won’t be conditions for the support,” Liu said.”Germany is discussing this in detail.”

While capacity expansion in Europe seems well underway, TSMC faced headwinds in the United States. At an earnings call last month,  Mark Liu said the company’s first fab plant in Arizona has to be delayed from late 2024 to 2025 owing to skilled labor shortage. “While we are working to improve the situation, including sending experienced technicians from Taiwan to train the local skilled workers for a short period of time, we expect the production schedule of N4 process technology to be pushed out to 2025,” Liu told analysts. In addition to a lacked of skilled workers, Liu noted another challenge his company faced is that the labor costs in U.S. are higher than those in Taiwan. TSMC originally anticipated the U.S. project to start initial test production in September this year, and pushed back the production plan to next February or March in late last month, admitting the construction work was significantly behind its planned schedule. 

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