TSMC’s board of directors has approved an ambitious plan to build a new chip fabrication facility in Germany in a board meeting held today, the Taiwanese chipmaker announced as reported by Reuters.
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The new manufacturing facility will be TSMC’s first in Europe and part of an eager yet calculated push to diversify its fabrication portfolio outside Taiwan and China amid escalated political tensions. The new factory is set to be established in the city of Dresden, the capital of the state of Saxony. The state already houses numerous chipmaking factories, and negotiation rounds with TSMC are said to have involved more than 40 meetings.
TSMC will jointly establish a new subsidiary, European Semiconductor Manufacturing Company (ESMC), with other companies including Bosch, Infineon, and NXP. TSMC will control 70% of ESMC, investing over €3.5 billion ($3.8 billion) in funds towards the new fabrication plant. The German federal government will invest up to €5 billion ($5.5 billion) in the form of tax breaks incentives and labor training. Once completed, the new plant will produce up to 40,00 wafers a month, mainly for automobiles and industry applications.
The subsidies provided by Germany are part of the EU’s European Chips Act, which seeks to double the Union’s chipmaking output by 2030. EU member states will provide up to €43 billion ($47 billion) in subsidies to attract private chipmakers to the continent in a bid to catch up to the US and lessen reliance on China. The EU also hopes to avoid the severe supply shortage of silicon chips as witnessed during the COVID-19 pandemic and subsequent lockdowns.
While the new German plant is unlikely to fabricate chips for Apple, the decision reflects TSMC’s commitment to move out of China and Taiwan amid elevated tensions that involve the US. A doomsday scenario that would see China invade the Taiwanese territory would surely decimate global chip supply, particularly for Apple, which deeply relies on TSMC to fabricate its state-of-the-art silicon for iPhone, iPad, and Mac.
Reuters also reports that TSMC’s board approved a $4.5 capital injection into a new fab plant being built in Arizona as part of a $40 billion investment. The Arizona facility is set to build chips for Apple beginning in 2025, unlike the German one. TSMC is also set to expand its chipmaking facilities in Japan in a joint effort with other chipmakers to make use of a $12 billion government program.