TSMC in talks with suppliers about first European plant | Popgen Tech

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 capitalize on growing demand from the region’s auto 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 after the invasion of Ukraine. But growing demand from Europe’s automakers for a locally produced supply of chips has prompted TSMC to reconsider the idea, the people said.

A decision to build the plant would be a major boost for the EU, which is racing to reduce its dependence on imports of semiconductors – essential components in everything from smartphones to cars – from Asia. Brussels approved €43 billion in subsidies earlier this year in a bid to lure chip makers to Europe.

TSMC’s discussions with various materials and equipment suppliers are focused on whether they too can make the investments needed to support the plant, people familiar with the matter said.

Chip manufacturing is a complex process that relies on more than 50 types of equipment, such as lithography and etching machines, and more than 2,000 materials, including chemicals and industrial gases.

“We will try to support our customers. We would not allow [them] walking alone in the desert,” said one manager of a supplier that will supply key materials to the Dresden plant, adding that government support would be needed.

Rising 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 remains committed to investing in Europe, but the Magdeburg plant needed to be competitive, according to people familiar with the matter.

If TSMC goes ahead with a Dresden plant, it will focus on 22-nanometer and 28-nanometer chip technologies, similar to those it plans to make in a factory it is developing with Sony in Japan. Nanometers refer to the size of each transistor on a chip – the smaller the nanometer, the more powerful and advanced the semiconductor.

TSMC will have to weigh whether building a plant in Dresden will put too much of a strain on its workforce. The chipmaker is already sending several hundred engineers to support new plants it is building in the US and has said it will need to deploy 500 to 600 more to help set up the factory in Japan.

Europe, the Middle East and Africa account for about 6 percent of TSMC sales, a fraction of the 65 percent the group generates from North America.

A TSMC spokesman said that “no possibility” is being ruled out about a potential plant in Dresden.

TSMC’s overseas expansion comes as global chipmakers such as Intel and Samsung rush to expand capacity. The world’s three biggest chip makers have committed to investing at least $380 billion over the next decade to build new factories in Taiwan, South Korea, the US, Japan, Germany, Ireland and Israel.

In the US, The Chips Act, proposed in 2020 and passed by Congress last year, has sparked $200 billion in private investment in the country’s chip manufacturing capacity, according to the Semiconductor Industry Association.

The speed of the global expansion has raised questions about the risk that the industry could face a lot of chips if global economic growth slows sharply. But with the global semiconductor market predicted to reach $1 billion in value by 2030, chipmakers must now decide how they will meet that expected demand, as it takes years to build plants.