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On August 20, TSMC's German plant (ESMC) officially broke ground, and European Commission President Ursula von der Leyen also officially announced the approval of Germany to provide 5 billion euros in aid to TSMC's chip joint venture in Dresden. Von der Leyen emphasized that welcoming TSMC is an opportunity for Europe, and the European "Chips Act" is the general trend. After TSMC joins, it will strive to achieve the goal of 20% of the global market share of European localized production chips by 2030.

The EU Chip Act was introduced in 2022, and Intel, TSMC, Infineon, STMicroelectronics, and GlobalFoundries subsequently announced plans for new factories in Europe. Two years later, very few projects have actually started construction, and even fewer have received state aid approved by the European Commission. Plans by Intel, Infineon, and Wolfspeed have not been approved by the EU. These delays have slowed the region's efforts to achieve self-sufficiency and protect against escalating trade tensions, and have made the EU's goal of winning a 20% global market share by 2030 out of reach.

TSMC: Germany's 12-inch wafer factory breaks ground, $11.1 billion factory faces four major challenges

TSMC officially held a groundbreaking ceremony for its Dresden wafer fab ESMC on August 20. The fab is a joint venture between TSMC, Bosch, Infineon and NXP, with a total investment estimated at more than 10 billion euros (11.08 billion U.S. dollars). Construction of the fab is expected to begin at the end of 2024, with mass production expected to begin as early as the fourth quarter of 2027.

ESMC will be its first 12-inch wafer fab in Europe, focusing on automotive chips, using 28nm/22nm CMOS (complementary metal oxide semiconductor) and 16nm/12nm FinFET (fin field effect transistor) technology, with a monthly production capacity of approximately 40,000 wafers, and is expected to create 2,000 direct high-tech jobs.

In terms of application, the outside world speculates that development into the automotive field will be the biggest focus of TSMC's European factory. In addition, moving towards high-voltage, high-current third-generation semiconductors will be an important mission of ESMC.

However, breaking ground is just the beginning. TSMC's overseas expansion, driven by geopolitical concerns, still faces many obstacles: high costs, labor shortages, cultural differences and powerful unions.

To address the high cost of building a wafer fab in Germany, TSMC is pursuing various strategies. These include securing government subsidies for basic utilities, land, and tax breaks. In addition, the company is seeking joint venture partners to provide substantial construction subsidies and long-term contracts. TSMC also said it will maintain its long-term gross margin target of more than 53%. This means that the company will raise foundry prices to offset the increased costs, effectively shifting part of the burden to customers and the supply chain.

To meet the challenge of labor shortage, TSMC is implementing measures including transferring employees from Taiwan, recruiting Taiwanese students who are proficient in German, and establishing partnerships with local universities to cultivate talents. In addition, TSMC also offers competitive salary packages to attract German workers who value work-life balance.

One of the focuses of attention for TSMC's factory building in Germany is the difference in work culture between the two sides. Eva Langerbeck, the new director of the German Economic Office in Taiwan, admitted that aspects such as corporate management and employee communication mode are challenges that the new factory may face.

Germany's powerful labor unions also pose a major challenge to TSMC. To mitigate these risks, TSMC has appointed former Bosch fab manager Christian Koitzsch as president of ESMC to facilitate communication between labor and management.

In addition, similar to the experience in the United States, it will be challenging to maintain high-efficiency production in Germany similar to that of Taiwan's wafer fabs. The huge pressure of shift work and responsibility system is a difficult concept for European workers to accept. How TSMC can balance long-term profitability with adapting to the work culture of Germany and other European countries will be a difficult task.

Intel: Cancellation of $18.9 billion wafer plant investment in France and Italy delayed in Germany

U.S. semiconductor giant Intel has quietly halted several European investment plans after suffering heavy losses, dealing a blow to its chip ambitions in Europe.

Intel Corp.'s 2022 plans foresee investing tens of billions of euros in new microchip factories or R&D facilities in Germany, Poland, Ireland, Spain, France and Italy.

But promised investments in France and Italy — worth billions of euros and potentially creating thousands of jobs — are temporarily unavailable after Intel reported a $7 billion loss in its manufacturing business in 2023. Intel said in a statement that it had “paused investments in France” citing “significant changes in economic and market conditions” since 2022.

Intel's plan to build a chip factory in Italy is also unlikely to be realized in the near future. Italian Commerce Minister Adolfo Urso said in March this year that Intel has postponed its investment in Italy.

Two years ago, Intel began talks with Italy about investing up to 4.5 billion euros in a manufacturing plant in the country. When asked about the status of the Italian plant, Intel said it was currently "focused on its active manufacturing projects in Ireland, Germany and Poland."

Now, attention is squarely on eastern Germany, where the German government is pushing Intel to expand its landmark 17 billion euro ($18.915 billion) chip plant plan with huge subsidies, which will be the largest foreign direct investment in Germany since World War II. But the plant has also been plagued by delays, and production at the main plant will not begin until the end of 2028 at the earliest.

The factories were originally planned to produce client PC products scheduled for release in the second half of 2028. Even if the factories were ready in mid-2028 and then began production, the schedule would still be tight. However, some recent reports show a different timeline, estimating that the fab construction will take four to five years, and it is now expected to start producing chips in 2029 to 2030.

Wolfspeed: The start of the $3 billion factory construction plan in Germany has been postponed for two years

In June, Wolfspeed postponed plans to build a $3 billion factory in Germany, highlighting the difficulties the European Union faces in increasing semiconductor production and reducing its reliance on Asian chips.

Wolfspeed's planned plant in the German state of Saarland, which would make computer chips for electric vehicles, has not been completely canceled and the company is still seeking funding, a spokesman said.

But the spokesman added that Wolfspeed is focusing on increasing production at its New York plant after cutting capital spending amid weak electric vehicle markets in Europe and the U.S. The company will not start construction in Germany until mid-2025 at the earliest, two years later than originally planned.

Infineon: Final construction permit for $5.6 billion Dresden chip plant approved, subsidies still undecided

In June this year, Infineon announced that its new smart power semiconductor factory in Dresden, Germany has entered the final stage of construction. Saxony Prime Minister Michael Kretschmer has officially submitted the final building permit for the factory during his visit.

The total investment in the new plant is 5 billion euros (about 5.564 billion U.S. dollars). It is planned to start production in 2026. It will mainly produce analog/mixed signal and power products for the automotive industry and renewable energy. It is understood that the project will seek funding under the European Chip Act. Infineon's goal is to obtain a subsidy of about 1 billion euros, but the subsidy for the project has not yet been approved by the European Union.

ON Semiconductor: Plans to invest $2 billion to expand Czech chip plant

In June this year, US chipmaker Onsemi said it would invest up to $2 billion to increase its semiconductor production in the Czech Republic, thereby expanding the company's production capacity in Europe.

ON Semiconductor will expand its business base in the eastern town of Roznov pod Radhostem to cover the entire production chain of silicon carbide semiconductors, including chip modules for the automotive and renewable energy sectors. "The plant will produce the company's intelligent power semiconductors, which are critical to improving energy efficiency in electric vehicles, renewable energy and artificial intelligence data center applications," ON Semiconductor said in a statement.

Simon Keeton, head of ON Semiconductor's power solutions division, revealed that the newly invested factory may start production in 2027. ON Semiconductor said: "Through this investment, ON Semiconductor will help the Czech Republic occupy a more important strategic position in the EU semiconductor value chain and prove that all EU countries can benefit from the European Chip Act."

Czech Prime Minister Petr Fiala said the investment would be "the largest of its kind in modern history" and would double the current output of Czech chip factories.The current chip factory is capable of producing 10 million chips per day. The Czech Ministry of Industry and Trade said the country's aid could be as high as 27.5% of the total investment, adding that the incentives should be approved in the first quarter of 2025 and need to be notified to the European Commission before approval.

STMicroelectronics: Will invest $5.4 billion to build a factory in Italy to produce chips for electric vehicles

On May 31, the European Commission approved chipmaker STMicroelectronics (ST) to invest 5 billion euros (about 5.4 billion US dollars) to build a factory in Catania, Sicily, with the support of the Italian government, to produce specialized microchips to improve the energy efficiency of electric vehicles.

Having a large, integrated European factory to produce and package silicon carbide chips would have "broadly positive effects on the European semiconductor ecosystem" and help guarantee regional security of supply, a European Commission statement said.

The European Commission said the Catania plant would help reverse over-reliance on imported equipment particularly relevant to Europe’s digital and green transformation goals, and approved 2 billion euros in aid for Italy.

GlobalFoundries: Plans to invest $8 billion to double the production capacity of its Dresden chip plant in Germany

In 2023, it was reported that Globalfoundries, a major US wafer foundry, planned to invest US$8 billion to expand its factory in Dresden, Germany, and its production capacity is expected to double by 2030.

GlobalFoundries CEO Thomas Caulfield said that he has asked the German government to subsidize the company $4 billion, matching TSMC's 50% subsidy ratio.

GlobalFoundries has set up a factory in Dresden to produce chips since 1999. Since 2020, the company has invested $2 billion to expand the factory. GlobalFoundries withdrew from the competition for chip size miniaturization more than ten years ago. The microcontrollers it produces are mainly used in specific microcomputers, and Infineon, a major automotive chip manufacturer, is its main customer. The company's Dresden factory has become an important source of chip supply for the German automotive industry. Manfred Horstmann, the general manager of the factory, said that since 2020, the proportion of the factory's automotive industry turnover has increased from 1% to the current 20%, and is expected to reach 25% soon.

GlobalFoundries and STMicroelectronics: Invest 7.5 billion euros to build a joint venture wafer fab in France

On June 7, GlobalFoundries, a major American wafer foundry, and STMicroelectronics, a major automotive chip manufacturer, jointly announced that the two parties have officially signed a cooperation agreement to build a joint wafer factory in Crolles, France, which was announced on July 11, 2022.

According to reports, the total cost of the plan's capital expenditure, maintenance and ancillary costs is expected to be 7.5 billion euros. The fab will also benefit from significant financial support from the French government (managed by Bpifrance), while also meeting the goals set out in the European Chip Law and part of the "France 2030" plan recently approved by the European Commission.

The goal of the factory is to increase to maximum production capacity by 2026. Once completed, the maximum annual production capacity will reach 620,000 12-inch wafers per year (STMicroelectronics accounts for approximately 42% and GlobalFoundries accounts for approximately 58%).

The announcement said that STMicroelectronics and GlobalFoundries' new factories have received significant financial support from the French government, which will make a significant contribution to achieving the goals of the European Chips Act.

Final Thoughts

Von der Leyen pointed out at the groundbreaking ceremony of TSMC's European plant that three years have passed since we set the goal of doubling Europe's share in global chip production to 20%. It has attracted about 115 billion euros (about 127.9 billion U.S. dollars, 912.3 billion yuan) in public and private investment commitments, which is a real investment revolution in the European chip industry.

However,The contradiction between investment commitments and actual progress continues to ferment with the delay of subsidy review.Can the groundbreaking of TSMC's European plant bring a carnival and continued enthusiasm for chip manufacturing in Europe? When will the goals of the European Chip Act be achieved? Let us wait and see.