TSMC starts building its first billion-dollar chip plant in Europe

European Commission president Ursula von der Leyen said the plant is an ‘endorsement for Europe as a global innovation powerhouse’ and will create 11,000 jobs.

Taiwan Semiconductor Manufacturing Company (TSMC) is building a €10bn chip plant in Dresden, Germany, the company’s first in Europe.

In an announcement today (20 August), the European Commission said it has approved €5bn in state aid for the European Semiconductor Manufacturing Company (ESMC), a joint venture between TSMC, Bosch, Infineon and NXP.

The idea is the strengthen the security and resilience of Europe’s chip supply, an objective of the EU Chips Act that came into effect last September.

First proposed by the Commission last year, the act aims to increase the EU’s share of global chip production from 10pc to at least 20pc by the end of the decade. It was also proposed during the global chip shortage, as a way to prevent future supply constraints. The EU approved the Act in July, just two weeks  after the EU parliament adopted the €43bn act in a 587 to 10 vote with 38 abstentions.

Commission president Ursula von der Leyen called the launch of the new chip plant – which is expected to create 11,000 new jobs in Germany’s so-called Silicon Saxony region – an “endorsement for Europe as a global innovation powerhouse”.

“European chip companies will gain access to new technologies and production capacities. European industries will benefit from more reliable local supply chains, and new products that are tailored to their needs,” von der Leyen said.

“And at a time of growing geopolitical tensions, TSMC will also benefit from geographic diversification to Europe, better access to our European strengths, like automotive … and to our unique single market. So this is a true win-win situation for all of us.”

TSMC saw its net profit grow by 36.3pc in its latest quarterly earnings over the same period last year, beating analyst estimates. The chip giant said last month that its revenue stood at NT$673.51bn in its second quarter of 2024 ended 30 June. This represents a more than 40pc rise in quarterly revenue over the same period last year. Revenue also increased 13.6pc over the previous quarter.

Just a week prior to its earnings call, TSMC entered the trillion-dollar club thanks to soaring shares as a result of skyrocketing demand for AI chips.

“Our business in the second quarter was supported by strong demand for our industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality,” Wendell Huang, senior vice-president and chief financial officer at TSMC, said at the time.

“Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies.”

In early April, the US said it was awarding TSMC billions of dollars in subsidies and loans to boost semiconductor production in the country as part of a broader goal of improving its share in the chips market.

Find out how emerging tech trends are transforming tomorrow with our new podcast, Future Human: The Series. Listen now on Spotify, on Apple or wherever you get your podcasts.