Taiwan Semiconductor-backed firm gets EU nod for €5B German aid for chip plant

The European Commission said it has approved €5B ($5.5B) in German state aid to support the construction and operation of a new microchip manufacturing plant by European Semiconductor Manufacturing Company, or ESMC, in the German city Dresden.

ESMC is a joint venture between Taiwan Semiconductor Manufacturing (NYSE:TSM), Robert Bosch GmbH, NXP Semiconductors (NXPI) and Infineon Technologies (OTCQX:IFNNY).

Last year in August, TSM noted that the total investment is expected to exceed €10B, or roughly $11B, consisting of equity injection, debt borrowing, and help from the EU and the German government. The fab will be operated by TSM.

The European Commission said on Tuesday that the project aims at serving the demand for automotive and industrial applications.

The agency noted that the facility will be the first-of-a-kind in Europe, as currently there is no comparable mass-production plant for the specific technology features offered.

ESMC will be the first open foundry that will produce high-performance chips, based on 300mm silicon wafers with 28/22nm and 16/12nm technology nodes, using field-effect transistor, or FinFET, technology with logic, mixed-signal, radio frequency and embedded non-volatile memory technology processes, according to the Commission.

The facility will operate as an open foundry, meaning that any customer, not only shareholders like TSM, can place orders for specific chips.

The plant, which is expected to be operating at full capacity by 2029, is anticipated to produce 480,000 silicon wafers per year.

The EU regulator assessed the German measure under the European Chips Act.

The EU’s €43B Chips Act, which was announced in 2023, is aimed at supporting local chip making. In May, Belgium-based nanoelectronics research hub imec said that certain European research labs were expected to get €2.5B (about $2.72B) in funding under the European Chips Act to establish a pilot line to develop and test future generations of advanced chips.

The U.S., China, Japan and South Korea are among countries which have stepped up efforts to boost domestic chip manufacturing to stay ahead in the AI race.

In the U.S., the CHIPS Act funding aims to increase U.S. semiconductor manufacturing and research, especially in advanced semiconductors. Several companies including, Intel (INTC), SK hynix, Samsung (OTCPK:SSNLF), TSM and Micron Technology (MU) are getting funds under the act.

TSM -0.32% to $174.88 premarket Aug. 20