EU approves German state aid for $11B TSMC-led chip plant

BRUSSELS -- Taiwan's TSMC launched a major new microchip plant in Dresden, Germany, after the European Commission approved €5 billion ($5.5 billion) worth of state aid.

The plant is expected to be a key supplier to the European industry and carmakers.

The large aid award for the project, which will cost €10 billion in all, is the biggest approved so far under the EU Chips Act, and the first in Germany.

It is also the first project in Europe under TSMC, the world's largest contract chipmaker, and is expected to improve Europe's resiliency if a chip shortage of the type experienced during the COVID pandemic happens again.

TSMC has formed a joint venture to build the plant with European suppliers Robert Bosch, Infineon and NXP that have each taken a 10 percent stake. The joint venture is called the European Semiconductor Manufacturing Company (ESMC)

TSMC says the plant will be an important source of the MCUs or microcontroller units used throughout cars in windows, brakes and sensors.

Bosch, NXP and Infineon have said they will use the plant at least in part to make various types of automotive chips.

"This is a true win-win situation for all of us," the European Commission President Ursula von der Leyen said during the inauguration ceremony for the plant on Aug. 20.

TSMC chief executive C.C. Wei said the plant would help bring the chipmaker "close to its customers" in Europe.

German Economy Minister Robert Habeck said his government would maintain the fast pace of the project, which targets production in 2027.

Conditions for aid approval included that ESMC guarantee access for smaller companies and universities.

"The facility will operate as an open foundry, meaning that any customer – including but not limited to the three other shareholders besides TSMC – can place orders for the production of specific chips," the Commission said in a statement announcing the subsidy approval.

Other chip plants in the works

Approval for state aid under Europe's 43 billion-euro Chips Act has been slow in coming, with only STMicroelectronics projects in France and Italy previously winning grants.

The largest European chips project still seeking approval is a 30 billion-euro plant planned by Intel in Magdeburg, Germany that won't break ground this year as initially planned.

Completion of the Intel plant, which would be Europe’s only plant making the most advanced computer chips, is expected 4-5 years after EU approval.

An Intel spokesperson said the company is working closely with the EU and government partners to carry out its plans.