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Source: Global Times

[Global Times Special Correspondent in Germany Aoki Global Times Special Correspondent Wang Pinzhi] "Taiwanese chip giant TSMC's chip factory in Dresden, Germany will break ground in August." Germany's Manager magazine reported on July 30 that the chip manufacturer is accelerating the pace of expanding production capacity. It is reported that TSMC will hold a 70% stake in the new factory, and its partners Bosch, Infineon and Dutch chip manufacturer NXP will each hold 10%. The new factory will be called European Semiconductor Manufacturing Company (ESMC). Regarding TSMC's new factory, Japan's Nikkei Asian Review said that this will be "the latest step for the world's top chip manufacturer to expand its global production footprint."

TSMC logo data source: Visual China

"A new dimension for sustainable semiconductor production in Europe"

According to Japan's Nikkei Asian Review, the plant, which will cost more than 10 billion euros (about 78.2 billion yuan) and is scheduled to start production in 2027, represents "a new dimension of sustainable semiconductor production in Europe." At the groundbreaking ceremony held on August 20, TSMC CEO Wei Zhejia may attend, and relevant customers, suppliers and German government representatives will also participate.

Regarding TSMC's new factory construction progress, Manager Magazine reported that "TSMC has so far 'successfully' adhered to the originally announced timetable and is ahead of the US technology company Intel's factory construction plan." The two companies' move to build factories in Germany has always caused a lot of controversy because they will cost Germany a total of 15 billion euros in subsidies. Marcel Fratzscher, director of the German Institute for Economic Research, even regarded the two companies' chip factory plans in Germany as "an uncertain bet on the future."

The report mentioned that amid the boom in artificial intelligence, demand in the chip industry has increased, but TSMC's Dresden plant will not produce high-end chips needed for smartphones or artificial intelligence applications. Instead, it will produce power semiconductors for the automotive industry, aiming to meet the EU's demand for localization of automotive and industrial chips.

Three major obstacles

Since announcing the construction of a new plant in Europe in August last year, TSMC has faced many challenges in promoting the construction of the new plant. The "Asia Digital Times" concluded that TSMC's German plant will face three major obstacles to profitability, namely the powerful local labor unions, high production and operation costs, and limited professional workers.

According to Taiwan's "Tech News", the director of the German Industrial Application Research Institute, Hoberg, suggested that TSMC's proposed salary and working conditions must be competitive, and the labor requirements must also be in line with the local German culture. In addition, the German Silicon Valley Association also reminded that the German union's tough attitude is one of the challenges that TSMC must overcome.

In terms of talent support, Taiwan's Central News Agency previously cited a report from a German think tank, saying that the labor shortage in Germany's semiconductor industry has increased by 30% from 62,000 before 2022 to 82,000 in 2023. The most in need are skilled workers, with a shortage of more than 40,000 people; the shortage of engineers with bachelor's and master's degrees who can engage in complex work such as process planning is 30,000 people. Fenster, the author of the report, said, "The growing professional labor shortage may affect the progress of factory establishment and production."

The same problem also plagues Intel, Wolfspeed and other chip manufacturers that plan to set up factories in Germany. According to the financial website "Praxi", Wolfspeed has postponed the start date of construction of the factory in Ensdorf, Saarland to 2025 at the earliest. Intel is still waiting for Brussels' final approval for billions of dollars in subsidies, and the company does not expect to start construction of the Magdeburg factory before 2025.

Highlighting the difficulty of transferring chip supply chain

In view of the postponement of plans of several companies to build factories in Germany, the Nikkei Asian Review reported that "Europe's plan to revitalize chip production has encountered obstacles." Economic commentator Stephen Angric said bluntly, "The United States and Europe face challenges in reducing their dependence on Asia for semiconductors." He said that the EU proposed a $1 billion plan, but it is not easy to promote the transfer of chip supply chains. Because decades of development have consolidated Asia's position as a semiconductor production center. From TSMC to South Korea's Samsung, they dominate the high-end semiconductor market. In addition, manufacturers in Southeast Asia are in a leading position in the traditional chip market.

In 2022, the EU Chip Act was officially announced, with the goal of increasing the EU's share of global chip production from the current 10% to 20% by 2030. However, so far, the European Commission has only approved the issuance of two subsidies in accordance with the act, and there are only a few factories under construction.

In an interview with the media earlier this year, Wenninck, former CEO of Dutch chip manufacturing giant ASML, said that the EU does not have the capacity to build production fast enough and that it is "completely unrealistic" to achieve its goal of increasing its share of the global computer chip market to 20% by 2030.