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European Commission President Ursula von der Leyen (third from left), TSMC Chairman Wei Zhejia (fourth from left), and German Chancellor Scholz (fifth from left) attended the ESMC groundbreaking ceremony held in Dresden, Germany (Photo source: TSMC)

TSMC's first European chip factory, which cost nearly 80 billion US dollars, has officially landed.

On August 20, Titanium Media App learned that TSMC, the leading wafer foundry, jointly established with Infineon, NXP and Bosch, has landed its first European chip manufacturing plant (ESMC) in Dresden, the Free State of Saxony, Germany, and held a groundbreaking ceremony.

TSMC said that the total investment in the first ESMC wafer fab is estimated to exceed 10 billion euros (about 79.193 billion yuan), including equity injection, debt, and strong support from the EU and German governments. It is planned to start construction before the end of 2024 and is expected to enter the production stage by the end of 2027. After full operation, ESMC will produce TSMC 28/22nm CMOS and 16/12nm FinFET transistor technology chips, that is, the most advanced 12nm chips, and is expected to create about 2,000 direct high-tech professional jobs, thereby supporting Europe's advanced automotive chip manufacturing system.

The new plant is of great significance. It is TSMC's first chip manufacturing plant in Europe, the largest single investment in the history of the Free State of Saxony, Germany, and the first and only chip production base in the European Union with advanced manufacturing capacity. It is also TSMC's first wafer plant in the world that focuses on producing chips for the automotive and industrial fields.

“We are working with Bosch, Infineon, and NXP to build this Dresden fab to meet the fast-growing European demand for semiconductors in the automotive and industrial sectors,” said TSMC Chairman and President C.C. Wei. “With this state-of-the-art fab, we will bring TSMC’s advanced manufacturing capabilities to our European customers and partners, stimulate local economic development, and drive technology forward across Europe.”

German Chancellor Olaf Scholz said: "We rely on chip semiconductors to develop sustainable future technologies, but we cannot rely on semiconductor supplies from other parts of the world." It is worth mentioning that half of the ESMC wafer factory (about 5 billion euros) comes from subsidies from the German government.

European Commission President Ursula von der Leyen announced directly:The European Commission has approved a 5 billion euro (about 39.596 billion yuan) subsidy measure for Germany in accordance with EU State aid rules to support the construction and operation of the ESMC semiconductor wafer factory.

It is reported that ESMC was established in 2023 and is jointly invested by TSMC, Bosch, Infineon and NXP, aiming to build an advanced semiconductor wafer fab in Europe. TSMC holds a 70% stake in the Dresden plant, while Bosch, Infineon and NXP each hold a 10% stake.

In addition to CMOS and FinFET, ESMC will develop innovative and differentiated technologies for automotive applications, embedded flash memory chips, resistive memory chips (RRAM), magnetoresistive random access memory chips (MRAM), radio frequency (RF) and other non-volatile memory chips in the future. TSMC emphasized that it will operate the wafer fab in accordance with the professional integrated circuit manufacturing service model and will not be restricted to serving customers other than Bosch, Infineon and NXP.

Currently, Germany is leading the EU's efforts to produce one-fifth (20%) of the world's semiconductors by 2030 to address the chaos and insufficient production capacity caused by the global automotive "chip shortage" two years ago, thereby achieving the localization of cutting-edge chip manufacturing.

The Scholz government has planned to invest 20 billion euros to support German chip production, including TSMC factories and 10 billion euros in aid for Intel's factory planned to be built in Magdeburg. The first ESMC wafer fab will help Europe reduce its dependence on imported chips from Asia. German automakers such as Volkswagen and Porsche have expressed interest in increasing domestic chip production and increasing orders for new factories.

TSMC's performance is relatively stable at present. On July 18, TSMC (TPE: 2330/NYSE: TSM) announced its second quarter financial report for 2024, with revenue of NT$673.51 billion, a year-on-year increase of 40.1%; net profit of NT$247.662 billion, a year-on-year increase of 36.3%. In terms of US dollars, revenue of US$20.822 billion and net profit of US$7.657 billion were achieved in the quarter.

Among them, under the wave of generative AI, the strong demand for AI chips in data centers has been the biggest driving force behind TSMC's performance recovery in the past few quarters. Nvidia's main product H100, as well as GPUs using the latest Blackwell architecture, AMD's MI300, Intel's Gaudi 3 and other AI chips all use TSMC's 5nm process. Wei Zhejia said that the next-generation 2nm process will be put into mass production in 2025. Compared with the previous generation process, 2nm provides 10%-15% faster speed at the same energy efficiency, and the 2nm process has 25%-30% higher energy efficiency at the same speed. "As strong demand for AI continues, TSMC will continue to invest to support customer growth."

According to the plan, TSMC's capital expenditure will reach US$30-32 billion in 2024, of which 70%-80% will be used for advanced process research and development, 10%-20% will be used for special process research and development, and 10% will be used for advanced packaging and testing technology.

TSMC has significantly increased the pace of overseas factory construction recently. It has opened its first factory in Japan this year and pledged to build three advanced chip factories in Arizona, the United States. The total investment has exceeded US$65 billion (approximately RMB 463.613 billion), or more than RMB 460 billion.

(This article was first published on Titanium Media App, author: Lin Zhijia, editor: Hu Runfeng)