Taiwanese chipmaker TSMC in talks with suppliers over first European plant

TSMC is in advanced talks with key suppliers about setting up its first potential European plant in the German city of Dresden, a move that would allow the world’s largest chipmaker to capitalise on booming demand from the region’s car industry.

The Taiwanese company is sending a team of senior executives to Germany early next year to discuss the level of government support for the prospective plant as well as the capacity of the local supply chain to meet its needs, according to people familiar with the matter.

The trip will be the second in six months by TSMC executives and a final decision on whether to invest billions of dollars in a plant, which could begin construction as early as 2024, is expected to follow soon after, the people said.

Last year TSMC was asked by customers to consider building a plant in Europe, but halted an initial review following the invasion of Ukraine. But growing demand from Europe’s carmakers for a locally manufactured supply of chips has prompted TSMC to revisit the idea, the people said.

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A decision to build the plant would be a major boost for the European Union, which is racing to cut its reliance on importing semiconductors – vital components in everything from smartphones to cars – from Asia. Brussels earlier this year approved €43 billion in subsidies in a bid to attract chipmakers to Europe.

TSMC’s talks with several materials and equipment suppliers are focused on whether they can also make the investments required to support the plant, people familiar with the matter said.

Manufacturing chips is a complex process relying on more than 50 types of equipment, such as lithography and etching machines, and more than 2,000 materials including chemicals and industrial gases.

Surging energy costs and higher inflation have already prompted US chip group Intel to seek more support from the German government for its plan to build a €17 billion plant in the eastern city of Magdeburg.

Intel is still committed to investing in Europe but the Magdeburg plant had to be competitive, according to people familiar with the matter. – Copyright The Financial Times Limited 2022