TSMC’s Dresden fab talks reach advanced stage, says report

Business news | March 17, 2023

By Peter Clarke

Discussions between Taiwan foundry TSMC and the German state of Saxony over the construction of a Dresden wafer fab are focused on how much subsidy is available, according to a Reuters report.

While the German federal and state governments are prepared to put up money, additional support maybe be needed from the European Union, to reach the levels of subsidy TSMC requires, the report said referencing an unnamed source. A secondary issue is whether Taiwan will try to tie the creation of a wafer fab in Europe to an acknowledgement of the island country by way of a trade agreement.

The European Union appears to be shying away from beginning trade deal negotiations with Taiwan for fear of upsetting the People’s Republic of China (PRC). Meanwhile Taiwan faces the threat of an invasion from the PRC, which considers Taiwan to be a renegade territory it will take control of at a time of its own choosing.

TSMC acknowledged it had opened discussions with customers and the German government in 2021 (see TSMC opens wafer fab talks with German government and TSMC confirms German fab talks). Up until that point the company had declined to open up manufacturing in Europe saying it preferred to cluster its fabs in Taiwan for economies of scale.

The European Union is pushing through the European Chips Act that will theoretically ease national government funding rules for semiconductor wafer fabs. Major nations and regional blocs are trying to guarantee supplies of chips for their domestic industries after supply chains broke down in 2020 and 2021. Inward investment for wafer fabs has for many years attracted subsidy levels of around one third of the capital expenditure but in the most recent spate of investment announcements subsidies have been running at 40 to 50 percent (see Intel delays German fab, wants more subsidy).

The same nations and regional blocs that are seeking support from chip leaders such as TSMC, Samsung, Intel and Globalfoundries are also eager to avoid escalating subsidy levels.

Delegations from Saxony have been visiting Taiwan for talks with TSMC, Reuters said referencing unnamed sources. The Chinese language Commercial Times said that a production start date of 2025 had been set for a Dresden fab that would support automotive companies and industrial customers with speciality processes.

TSMC is already building a mega-fab cluster in Arizona and a wafer fab in Japan in response to similar national supply chain interests (TSMC mulls second Japanese wafer fab). The US wafer fab is due to start production in 2024 using a nominal 4nm process.

However the state-controlled Taiwan Central News Agency has also chipped into the debate by way of an opinion piece published earlier this week. It said in translation: “The EU wants Taiwan to . . . invest in the establishment of wafer fabs in Europe. For Taiwan, it is not necessary from the perspective of enterprises.” It added: “A formal economic and trade agreement will . . . help improve Taiwan’s international status and deter China from aggression.”