(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. has agreed to build a €10 billion ($11 billion) plant in eastern Germany in partnership with Infineon Technologies AG, NXP Semiconductors NV and Robert Bosch GmbH.
The planned fab will be 70% owned by TSMC, which will operate the facility in the city of Dresden, with Infineon, NXP and Bosch each holding a 10% equity stake, subject to regulatory approval, the companies said Tuesday in a joint statement.
Slated to begin production by the end of 2027, it will provide chips for the automotive and industrial sectors and is a first step for TSMC in establishing a major European presence to counter risks from escalating US-Chinese tensions.
It’s also another coup for Chancellor Olaf Scholz’s ruling coalition, which has agreed €10 billion in aid for a new Intel Corp. plant in Magdeburg in a push to shore up the country’s tech sector and secure supplies of critical components. The government will provide as much as €5 billion in subsidies for TSMC’s Dresden factory, Bloomberg has reported.
The Taiwanese company said in a separate statement that it will contribute €3.5 billion to the project, dubbed European Semiconductor Manufacturing Company GmbH. Total investment is expected to amount to more than €10 billion, including “strong support from the European Union and the German government,” and it will create about 2,000 direct high-tech jobs, the companies said.
TSMC shares in New York fell as much as 2.8% in early trading; NXP dropped as much as 2.5% on the news. Infineon declined as much as 3.4% in Germany.
The new site will boost Europe’s efforts to reduce its reliance on Asia for importing vital technology and comes after German carmakers including Volkswagen AG and Porsche AG highlighted their keen interest in having a TSMC plant in Europe’s biggest economy.
Governments around the world are competing fiercely for new chip factories to secure more control over semiconductors critical to most electronics and next-generation technologies, including AI.
Robert Habeck, Scholz’s deputy and the economy minister, said “robust” domestic semiconductor production is key to maintaining Germany’s global competitiveness.
“Semiconductors keep our world running and make the transformation to climate neutrality possible,” Habeck said in an emailed statement.
“Without them, no computer runs, no car drives, and neither wind nor solar plants can produce energy,” he added. “TSMC’s investment will therefore make a substantial contribution to securing the supply of semiconductor chips for Germany and Europe.”
TSMC, the main chipmaker for Apple Inc. and Nvidia Corp., has also approved major projects from the US to Japan to mollify customers concerned about a conflict in the Taiwan Strait.
Beijing’s military has shown increasing signs of aggression as the Biden administration wields sanctions and trade restrictions to contain China’s rise.
TSMC has committed to creating two advanced facilities in Arizona with a total price tag of $40 billion, and is building an $8.6 billion plant in Japan with support from the government in Tokyo, Sony Group Corp. and Denso Corp.
EU negotiators this year agreed on a final version of a €43 billion plan to help Europe manufacture 20% of the world’s semiconductors by 2030.
Germany has emerged as one of the most aggressive countries chasing after more domestic chip manufacturing. Scholz’s government is expected to approve a plan this week to top up a fund targeting semiconductor production, along with climate-protection measures, by about $22 billion, according to people familiar with the discussions.
