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(Bloomberg) — Taiwan Semiconductor Manufacturing Co. broke ground in eastern Germany on its first European plant as the continent seeks to safeguard its chip supplies amid growing US-China tensions.
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“We are dependent on semiconductors for our sustainable future technologies, but we must not be dependent on other regions of the world for the supply of semiconductors,” said German Chancellor Olaf Scholz, who attended a ceremony on Tuesday to mark the start of construction of the €10 billion ($11 billion) fab in the city of Dresden. About half of the funding will be covered by state subsidies.
Germany is leading the European Union push to produce one-fifth of the world’s semiconductors by 2030, with the bloc seeking to build up capacity following Covid-era disruptions and as the relationship between Washington and Beijing deteriorates. The US, Japan and others are also showering subsidies on the chip industry to localize production of the components that control everything from cutting-edge artificial intelligence to everyday gadgets.
TSMC is the world’s biggest contract chipmaker, with Apple Inc. and Nvidia Corp. relying on it for their most important products. It will anchor the Dresden project with a 70% stake in the plant, which will produce chips for the automotive and industrial sectors.
TSMC Chief Executive Officer C.C. Wei attended the event together with European Commission President Ursula von der Leyen and the heads of Infineon Technologies AG, NXP Semiconductors NV and Robert Bosch GmbH, which each hold a 10% stake in the venture.
Scholz has emerged as Europe’s biggest backer of the semiconductor industry as he seeks to promote Germany’s tech sector and secure supplies of critical components for the country’s manufacturing businesses.
His government plans to spend €20 billion to bolster domestic chip production. That includes the TSMC plant and €10 billion in aid for a planned Intel Corp. plant in Magdeburg.
The EU approved Germany’s €5 billion subsidy for the Dresden fab, von der Leyen said at the event.
The new site will help Europe reduce its reliance on Asia for importing vital technology and comes after German carmakers including Volkswagen AG and Porsche AG expressed interest in boosting domestic chip production.
Production is slated to begin by the end of 2027.
Semiconductor production became a top priority for governments around the world when Covid-19 lockdowns exposed how vulnerable economies are to supply chain disruptions. Chip shortages shut down car factories around the world and took years to iron out.
The growing geopolitical rift between Washington and Beijing has raised the stakes. China is the biggest market for semiconductors and is seeking to produce more, and more sophisticated, chips domestically. The US has responded by attempting to limit its development with export controls and tariffs, citing national security concerns.
Tensions over Taiwan, where the bulk of TSMC’s production is based, have contributed to the company’s expansion abroad. Beijing considers Taiwan a part of its territory, and an economic blockade or conflict over the island would massively disrupt the global supply chain.
This year TSMC opened its first plant in Japan and it has pledged to build three advanced plants in the US state of Arizona with total investments exceeding $65 billion.
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