EU greenlights new chip factory in Dresden

The European Commission on Tuesday said it had approved a new silicon chip factory in Dresden as Taiwanese semiconductor giant TSMC broke ground on its first European factory.

European leaders are keen to avoid dependence on other regions of the world for the supply of semiconductors — indispensable in an array of electronics from computers, to cars and and even missiles.

What Brussels said

The approval allows the German federal government to provide €5 billion ($5.5 billion) of financial support for the new European Semiconductor Manufacturing Company (ESMC).

“The measure will strengthen Europe’s security of supply, resilience and digital sovereignty in semiconductor technologies,” a commission statement said. “The measure will also contribute to achieving the digital and green transitions.”

“The new large-scale manufacturing facility supported under the measure will deliver high-performance chips,” it added.

The Commission said the ESMC was a joint venture between the Taiwanese company and three European firms — Germany’s Bosch and Infineon and the Netherlands’ NXP.

Brussels’ ruling said the advantages were significant with little in the way of a downside and noted that the sum provided in assistance was not excessive.

“The measure has a limited impact on competition and trade within the EU. It is necessary and appropriate to ensure the resilience of Europe’s semiconductor supply chain.”

“In addition, the aid is proportionate and limited to the minimum necessary based on a proven funding gap.”

‘An endorsement for Europe’

Production is expected to start at the factory in 2027, with a focus on chips for the automotive industry. The first TSMC plant in Europe, it is expected to create 2,000 jobs.

German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen attended as TSMC broke the ground to mark the start of construction at the site.

“The world’s largest chipmaker is coming to our continent and joining forces with three European champions,” von der Leyen said, hailing it as “an endorsement for Europe as a global innovation powerhouse.”

“We are thrilled that such an important player in the global semiconductor scene is now opening a site here with us,” Scholz said.

TSMC said its aim was to meet the semiconductor demand of European automotive and industrial sectors, chief executive CC Wei said.

“With this state-of-the-art production facility, we will bring TSMC’s innovative manufacturing methods much closer to our European customers and partners,” Wei said.

Product sensitive to shocks

In the US, President Joe Biden’s administration has also sunk billions into ventures to build chip factories in several US states.

The semiconductor supply chain is highly prone to shocks and is vulnerable to what von der Leyen referred to as “growing geopolitical tensions.”

One major concern to have emerged in recent years is over Taiwan’s neighbor, China, which claims the democratic self-ruled island as its territory and has not ruled out force in seizing it.

In recent years, Beijing has ramped up rhetoric about “unification,” and TSMC — with a market share of more than 50% — has come under pressure to widen its operations by opening factories in other parts of the world.