TSMC's first chip manufacturing facility in Europe receives 5 billion euros in state support from Germany

The European Commission today approved German state aid of €5 billion to support TSMC’s chip plant in Dresden – the first in Europe.

The factory, called European Semiconductor Manufacturing Company (ESMC), is a joint venture between the Taiwanese chip giant, the Dutch company NXP and the German companies Bosch and Infineon.

TSMC will own 70 percent of the factory, while the European chipmakers will each hold a 10 percent share.

The €5 billion state aid is part of the EU Chips Act, which aims to increase the EU's share of global chip production to 20 percent by 2030. It is also the largest subsidy under this law to date (it covers about half of the estimated €10 billion-plus needed for the factory) – and for good reason.

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The first (obvious) is TSMC’s key position in the global semiconductor supply chain.

The future plant will also meet the law’s requirements to be a “first-of-its-kind facility” that will mass-produce technologies that do not currently exist in the Union.

ESMC will supply high-performance chips based on 300 mm silicon wafers with node sizes of 28/22 nm and 16/12 nm, using field-effect transistor (FinFET) technology – a transistor design that improves performance and energy efficiency.

The factory is expected to reach full operating capacity by 2029, producing 480,000 silicon wafers per year. It will supply semiconductors for automotive and industrial applications.

Under the agreement, ESMC will operate as an “open foundry,” meaning any customer (except the four shareholders) can order specific chips.

“[This] “We will ensure broad access to energy-efficient chips, including for smaller companies and start-ups, while limiting potential distortions of competition,” EU Competition Commissioner Margrethe Vestager said in a statement.

Attracting global technology giants

A crucial part of the EU's strategy to increase domestic production is to attract chip giants to the Union through financial incentives and favorable regulation.

In addition to TSMC, Intel has also committed to building a €30 billion mega-factory for advanced chips in Germany. If the plan is implemented – which is unlikely given the recent financial problems — the plant will supply chips for applications such as AI and high-performance computing (HPC).

But given fierce global competition and an increasingly unstable geopolitical landscape, it is unclear whether the EU will actually achieve its goals.