The German government is eagerly awaiting the approval of Taiwan Semiconductor Manufacturing Co. (TSMC) to commence the construction of a €10 billion ($11 billion) chip facility in Dresden. According to sources familiar with the matter, TSMC is expected to give the go-ahead for the project after a board meeting on Tuesday. This move comes as Chancellor Olaf Scholz's ruling coalition plans to provide up to €5 billion in subsidies for the plant, which will specialize in manufacturing chips for the automotive sector.
Governments worldwide are fiercely competing to attract new chip factories in an effort to gain more control over crucial components for global supply chains. The disruption in chip supplies during the height of the Covid-19 pandemic, particularly from Asia, led to widespread shortages affecting various industries, including automotive and consumer electronics. This highlighted the risks associated with relying heavily on foreign inventories.
Germany has emerged as one of the most proactive countries in its pursuit of increasing domestic manufacturing. Chancellor Scholz's government is expected to approve a plan this week to inject approximately $22 billion into a fund aimed at supporting semiconductor production and climate-protection measures. Intel Corp. is also in line to receive around $11 billion in subsidies from the German government for its own chip complex.
TSMC, based in Taiwan, has been engaging in discussions with potential partners such as NXP Semiconductors NV, Robert Bosch GmbH, and Infineon Technologies AG for investment in the new German venture. TSMC Chairman Mark Liu has confirmed the company's consideration of having customers hold minority stakes in the German plant, although he has not disclosed specific names of interested parties.
In order to address concerns over rising tensions in the Taiwan Strait, TSMC has been expanding its international presence. The company has committed to establishing two advanced facilities in the US state of Arizona, with a total investment value of $40 billion. Additionally, TSMC is building an $8.6 billion plant in Japan, with support from the government in Tokyo and investments from Sony Group Corp. and Denso Corp.
The approval for TSMC's Dresden chip plant is eagerly anticipated by the German government, as it will greatly enhance the country's domestic chip manufacturing capabilities and reduce dependence on foreign suppliers. With governments worldwide recognizing the strategic importance of semiconductor production, the race to secure new chip factories continues to intensify.