Taiwanese semiconductor manufacturer TSMC announced on Tuesday (8 August) it will invest over €10 billion in Germany in return for €5 billion in subsidies, with German economy minister Robert Habeck calling the move “proof” of Germany’s competitiveness.

TSMC, the world’s largest chips manufacturer, will build and operate the microchips plant together with the European companies Bosch, Infineon and NXP, which will each hold 10% of the plant. According to the announcement, about 2,000 jobs will be created.

“With TSMC’s investment, another global player in the semiconductor industry is coming to Germany. This shows: Germany is an attractive and competitive location, especially for key technologies such as microelectronics,” Habeck said in a statement.

As the government will green-light the project under a fast-track procedure, construction is expected to begin in the second half of 2024 with the start of production scheduled for 2027. The plant will produce chips, particularly for Germany’s car industry. 

Chips Act

Supply bottlenecks of microchips have plagued Europe in recent years. In 2021 global car production plummeted by 26% due to shortages of semiconductors, with the German car-reliant industry being hit especially hard.

Semiconductors being considered to be key components for the digital and green transition, the EU declared them a priority and passed the Chips Act to secure access to the essential parts.

The goal is to increase domestic chip production, with the EU seeking to double the global share from the current 9% to 20% by 2030, using a financial firepower of €43 billion.

The Chips Act also loosens the EU state aid framework and allows for more flexible approaches to subsidise semiconductor projects. While Germany is relying on this more flexible framework, the European Commission has yet to green-light the subsidies. 

“Robust domestic semiconductor production is of particular importance for our global competitiveness, because semiconductors keep our world running and make the transformation towards climate neutrality possible in the first place: without them, no computer runs, no car drives, and neither wind nor solar plants can produce energy,” Habeck said. 

The investment of TSMC will therefore make a “substantial contribution to securing Germany’s and Europe’s supply of semiconductor chips”, he added.

Attracting investment

Germany has recently managed to attract a number of the world’s largest chip manufacturers. In June, Intel announced the construction of a top-of-the-art chips plant in Magdeburg and announced an investment of €30 billion in return for €10 of subsidies. 

Similarly, US chips manufacturer Wolfspeed announced a €2.5 billion investment in Germany and Infineon started building its €5 billion plant in May. All of them received extensive state aid to invest in Germany.

Germany is looking to attract even more microchip companies in the future. “We are working to further improve the framework conditions for such large-scale investments, to speed up approval procedures and to reduce bureaucracy. This needs determination at all levels,” Habeck said.

However, critics fear that the extensive use of subsidies could undermine the single market and would benefit the EU countries with the most financial firepower. Advocates of extensive state aid, on the other hand, say that Europe wouldn’t be competitive internationally without it due to high energy prices.

[Edited by Nathalie Weatherald]

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