TSMC To Begin Work On $10.8 Billion German Fab By August In A Big Boost To Europe's Advanced Chip Manufacturing Ambitions

Taiwan Semiconductor Manufacturing Co(TSMC), the world's largest contract chip manufacturer, will set up a fab factory in Dresden, Germany, in partnership with Robert Bosch, Infineon Technologies and NXP Semiconductors, the company said in an official statement.

A delegation led by TSMC Chairman and CEO C C Wei will participate in the groundbreaking ceremony on 20 August, representing an important milestone for the chip behemoth that is expanding its global footprint forays into the European semiconductor market.

TSMC will hold a 70 per cent stake in the $10.8 billion Dresden plant, Robert Bosch, Infineon Technologies, and NXP Semiconductors will each own 10 per cent and contribute half a billion euros to fund the fab.

The German government has committed to a $5.2 billion subsidy for the project.Uncertainty over the funding to TSMC had arisen after a ruling by the German Federal Constitutional Court, which cast doubt over subsidies for construction of local semiconductor chip plants. However the government moved to resolve the contentious issues.

The joint venture will be called the European Semiconductor Manufacturing Corp. (ESMC).

Construction of the fab is set to begin by the end of 2024, with production targeted to start by the end of 2027.

The process fab will produce older processors on the 28nm, 22nm, and 16nm/12nm nodes from TSMC, and is expected to have a monthly production capacity of 40,000 300mm (12-inch) wafers. It is estimated that it will create about 2,000 direct high-tech professional jobs.

Though not on the leading edge, 22-28-nanometer and 12-16-nanometer grade technology continue to have widespread demand from consumer devices to cars.

Dresden fab factory is set to be TSMC's third overseas foray since 2020, coming after its $40 billion factory in the U.S. state of Arizona and its $8 billion facility in Kumamoto, Japan.

While TSMC is operationalising its plan to build a fab in Germany, Intel's 17 billion euro plan to build a cutting-edge plant fab has been delayed.

In June last year, Germany and chip behemoth Intel signed an accord paving the way for the building of a leading-edge semiconductor production facility in Magdeburg in the eastern state of Saxony-Anhalt.

Europe's Semiconductor Ambitions

While Europe has strengths in few areas of the semiconductor industry, it continues to remain dispensable to most parts of the global chip value chain. Its share of global chipmaking has remained stagnant for over two decades,

Chipmakers like STMicroelectronics, Infineon, and NXP are global leaders in the sensors and power electronics needed for heavy industrial applications.

Dutch firm ASML is the world’s sole provider of cutting-edge semiconductor manufacturing equipment while Germany’s BASF is a key input materials provider, and Siemens offers critical chip design software.

However, the continent currently cannot produce cutting-edge chips and plays a minor role in semiconductor design, accounting for only 9 per cent of the latter.

In September 2023, the European Union enacted a legislation that aims to create a resilient semiconductor supply chain within the continent by stimulating innovation, boosting production capabilities, and enhancing crisis response mechanisms. 

 By driving innovation in chip design, manufacturing, and packaging, Europe aims to cement its position as a global leader in advanced semiconductor technology.

The European chips act proposes to invest €11 billion in research to advance the development of innovative semiconductor technologies.

The rest of the funds would target security of supply by attracting investment to develop production capabilities and scale up European semiconductor small and medium-sized enterprises and start-ups.

It also proposes regulatory benefits such as fast-track permits for so-called 'first-of-a-kind' facilities.