Taiwan’s TSMC Nearing Agreement with Germany to Build New Chip Plant

Taiwan’s TSMC, the world’s biggest contract chip manufacturer, is in advanced talks with the German state of Lower Saxony over building a new factory. The chipmaker is now focused on government subsidies to support the investment. TSMC had first revealed in 2021 that it was in the early stages of reviewing a potential expansion into Germany, in what would be its first European plant. The European Union last year laid out the European Chips Act, which aims to ease government funding rules for semiconductor manufacturing that has previously faced state aid prohibitions, as the bloc looks to secure supplies after a chip shortage and supply chain bottlenecks during the COVID-19 pandemic.

Given the higher costs associated with building in Germany, including for labor, TSMC has been discussing subsidies it could get in return for building the factory.

TSMC had said in December that there was “no concrete plan” to build a chip factory in Germany.

In January, company CEO Wei said TSMC was talking to customers and partners about building an automotive-focused plant in Europe based on customer demand and the level of government support.

The EU has been looking to work with Taiwan as one of the “like-minded” partners it would like to partner to build new plants to shore up chip supplies.

The German and Saxony governments are willing to give subsidies but they also need further EU funds. Saxony officials discussed the EU Chips Act with EU Commission President Ursula von der Leyen on March 6 in Brussels

The Saxony government said decisions about building plants would be taken by companies, but added it was always in talks with leading firms about investing further in the region.

German economy ministry said the government was willing to support chip production efforts under the European Chips Act.

As part of its overseas expansion strategy, TSMC has committed $40 billion to build a chip plant in the U.S. state of Arizona, and is also building one in Japan and also considering a second one there.

The Arizona factory, among the largest foreign investments in U.S. history, will start production in 2024, using advanced 5-nanometre technology. Construction was announced after the U.S. passed the CHIPS Act, which earmarks $53 billion in subsidies and tax credits for the chips industry.

TSMC’s German factory, if is goes ahead, will likely produce less advanced chips, especially those used in the auto industry.

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