Taiwan Semiconductor Manufacturing Company (TSMC) announced on Tuesday its partnership with three German technology firms to establish a state-of-the-art facility in eastern Germany. This facility will have the capacity to manufacture up to 40,000 microchips per month, marking a significant step towards expanding TSMC’s production locations.
As the world’s largest semiconductor maker, TSMC revealed its plan to invest €3.5 billion ($3.8 billion) and hold a 70% stake in the joint venture, which will be based in Dresden. The remaining 10% ownership will be divided equally among the German companies Robert Bosch, Infineon Technologies, and NXP Semiconductors. The total investment, combining private and public funds, including substantial support from the European Union and the German government, is estimated to reach €10 billion.
Establishing its first manufacturing site in Europe, TSMC’s decision to choose Germany as its location is a considerable win for the country. Germany has actively sought chip manufacturers to support its thriving automotive industry and various other sectors that heavily rely on microchips.
C.C. Wei, the CEO of TSMC, emphasized the company’s dedication to catering to its customers’ strategic capacity and technological requirements through this investment in Dresden. Construction is scheduled to commence next year, with chip production expected to commence in 2027.
Germany has been investing billions of euros to attract chipmakers, demonstrating its commitment to fostering the industry. The German government has pledged €5 billion for the TSMC project, although specific details have not been disclosed by the Ministry of Economy. Additionally, Intel, a prominent chip manufacturer from Silicon Valley, is set to receive €10 billion in state subsidies to establish a plant in Germany. The government has also committed hundreds of millions in incentives to secure Wolfspeed, an American manufacturer of silicon carbide chips.
These financial incentives are crucial due to Germany’s high energy prices and complex bureaucracy, which have discouraged numerous industries from investing in the country, despite its robust automotive sector.
Another challenge that may arise is the availability of skilled employees. Many German manufacturers, especially in the southern and eastern regions like Saxony, are facing a severe shortage of qualified workers. Last year, Saxony recorded over 25,600 job vacancies in fields such as electronics, computer science, and software development, with no qualified applicants.
Attracting skilled workers from other countries might prove to be particularly challenging due to the presence of a vocal far-right faction in Saxony, fostering anti-immigrant sentiments. According to the Else-Frenkel-Brunswik Institute, which monitors German attitudes towards democracy, nearly half of the people surveyed in the eastern regions last year believed that foreigners were exploiting the social welfare system upon entering Germany.
To address this skills shortage, Germany passed a law in June that aims to facilitate the recruitment of qualified foreign workers. The law will take effect in November.
The upcoming facility in Dresden, to be operated by TSMC, will be the company’s fourth manufacturing site outside Taiwan. Construction is already underway for two factories in Arizona and one in Japan. TSMC’s Arizona plans have encountered setbacks, leading the company to deploy hundreds of Taiwanese technicians to expedite the process. The projected start date for these plants has been delayed to 2025. Cultural differences between TSMC and American workers have also caused tensions.
Nonetheless, regional leaders in Germany expressed their delight at the recent news from TSMC. Michael Kretschmer, the governor of Saxony, warmly welcomed TSMC to Silicon Saxony, hailing the announcement as the result of years of trustworthy discussions and negotiations.
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