Taiwan Semiconductor Manufacturing Co. (TSMC) and a handful of European chipmakers are in talks to spend as much as $11 billion on a new semiconductor manufacturing fab in Saxony, Germany.
It would be TSMC’s first fab in the E.U.
According to a report from Bloomberg, the semiconductor manufacturing facility will include government subsidies and funding from NXP Semiconductors NV, Robert Bosch GmbH and Infineon Technologies AG. However, the report indicated that no final decision has been made and the plans could be changed.
The Germany fab could be approved as soon as August and would focus on 28 nanometer chips.
The chip fab would be another expansion outside of Taiwan by the pure-play foundry after it made plans to build two chip fabs in Arizona where it will spend about $40 billion. TSMC claimed this will be the largest foreign direct investment in Arizona history and one of the largest foreign direct investments in the history of the U.S.
Originally, TSMC said it would not pursue building a fab in Europe, however, this new report seems that the company has changed its mind, especially if it is working with European semiconductor companies that will have a direct path to a chip supply.
Regionalization
The move continues the trend to regionalize the semiconductor supply chain and move away from Asia as the main aggregation of chipmaking — a weakness that was discovered when COVID-19 lockdowns caused shortages in numerous chip sectors.
Because of this, Europe and U.S. are expanding semiconductor manufacturing for national security purposes and to hopefully cushion the supply chain from extreme swings when geopolitical events break out or another pandemic or disaster hits.
Europe recently approved $47 billion for its European Chips Act, a big part of the EU’s plan to expand its chipmaking market share by 2030 to 20% to support this regionalization of the semiconductor supply chain.
Some funding for various fabs have already been approved such as Intel Corp. breaking ground in Magdeburg, Germany, as the planned location of its newest European semiconductor fab. Intel pledged to invest $18.6 billion for a mega-site as part of a spending spree that will cover some $87 billion over the next decade and numerous countries.
The Intel fab along with the chip plant from Wolfspeed in Germany, Bosch expanding its fabs in Europe and a new back-end facility from GlobalFoundries in Dresden may also get funding from the E.U. government as part of the Act.
It is unclear if this new TSMC fab in Germany will be eligible for funding from the European Chips Act.
Similarities to Japanese fab
TSMC’s proposed fab in Germany is very similar to the facility that TSMC is building in Japan. The pure-play foundry is working with partners in Japan on the funding with Sony Semiconductors and Denso Corp taking a stake in the chip plant and will receive government subsidies.
That fab broke ground last year and the investment will be $8.6 billion including the Japanese government subsidies and will be used to bolster Japan’s regional semiconductor supply chain.
For Sony, the investment in the fab means it will receive a stable supply of logic wafers and Denso will receive a stable supply of semiconductors for its automotive sector. Given the two plus year semiconductor shortage the industry is just getting over, investing now to secure supply in the future makes sense to these vendors.
With the partners and TSMC in Germany, they may be of similar thinking and why they are seeking to invest now.