European Commission President Ursula von der Leyen doubled down on EU efforts to turbo-charge the bloc’s domestic semiconductor production by attending the official groundbreaking ceremony for Taiwanese firm TSMC’s Dresden plant on Tuesday (20 August) – after the institution she heads greenlighted a €5 billion state aid scheme for the facility.
The EU executive has confirmed approval for the German government to finance half of the €10 billion investment needed to set up TSMC’s first European plant.
The Asian firm, which is the world’s biggest chipmaker, will operate alongside Bosch, Infineon and NXP in a joint venture called the European Semiconductor Manufacturing Company (ESMC).
The plant is the second largest single project planned under the EU’s Chip Act, behind the planned €10 billion subsidy to US chip maker Intel for a site in Magdeburg, Germany.
TSMC will produce flexible field-effect transistor-based chips, heavily utilised in industrial applications, including in the German automotive industry.
Due to the technological complexity of producing such chips, only a handful of companies are currently able to manufacture them – making TSMC’s expertise a key asset for what will be Europe’s first mass production facility to supply domestic industries with these highly sought-after chips.
Speaking at the ceremony in Dresden, von der Leyen called the project a “true win-win situation”.
“European chip companies will gain access to new technologies and production capacity. European industries will benefit from more reliable local supply chains and new products that are tailored to their needs,” she said.
“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,” she added.
The new factory is the fourth large-scale project to receive funding under the EU’s 2023 programme, under which €292.5 million and €2 billion have already been approved for two Italian projects and €2.9 billion for a French project.
Intel project lagging behind
In contrast, Germany’s biggest chip project, a factory planned by US manufacturer Intel in Magdeburg, is not progressing at the same pace.
Of the total €33 billion investment, €10 billion would come from state aid, which has not yet received the green light from Brussels. A second Intel project that is planned to be built in Poland has also not yet been formally approved by the EU.
“The Commission is in close contacts with the German and Polish authorities on possible support to Intel,” a Commission spokesperson told Euractiv on Tuesday.
Meanwhile, Intel’s financial headaches – which saw the company posting losses of €1.6 billion in the second quarter of 2024 – have led some to fear that the projects could be cut.
However, “There are no indications from Intel that Magdeburg would be called into question,” Sven Schulze (CDU/EPP), Economy Minister of the state of Sachsen-Anhalt, told German newspaper Handelsblatt on Tuesday (20 August).
Scholz defends state aid schemes under Chips Act
German Chancellor Olaf Scholz (SPD/S&D), who was also present at the ceremony, said he “fully supports” the EU’s goal of having 20% of the world’s chip production in Europe by 2030, adding that projects such as the Dresden plant would “bring to life” the bloc’s Chips Act.
“Semiconductors are the fuel, the oil of the 21st century,” said Scholz, dismissing criticism that large sums of state money were being spent on individual factories.
Chips are needed in “all industries”, he said, arguing that the benefits of the factories would extend beyond the individual project.
“Semiconductor manufacturing is one of the most capital-intensive industries of all,” Scholz said, noting that individual machines can cost several hundred million euros.
“If we want to have this production in Europe, where it is not always and necessarily the cheapest, then we have to make it financially possible,” he added.
The EU Chips Act, which came into force last year in response to the semiconductor supply-side bottlenecks experienced during the COVID-19 crisis, aims to strengthen both European supply-chain security and semiconductor research and innovation by allowing member states to subsidise semiconductor production and coordinating strategic semiconductor projects across Europe.
The measure, which is expected to mostly benefit investment in large countries with greater financial firepower, particularly Germany, has raised concerns that it could distort the single market and leave countries with shallower pockets behind.
However, some experts have pointed to the benefits of encouraging regional “clusters” and specialisation as an inevitable step in shoring up Europe’s industries.
Experts have also criticised the 20% target as lacking nuance, as chip production differs significantly depending on the type of chip.
“We are talking about very different small markets, some of which have very different requirements and very different price sensitivities,” Andre Wolf, head of the department for technology, infrastructure and industrial development at think tank CEP, told Euractiv on Tuesday.
However, he expects the EU to focus on cutting-edge technologies by making state aid conditional on “first of a kind” status, meaning that no other such production site should already exist in Europe.
Théophane Hartmann contributed reporting.
[Edited by Anna Brunetti/Daniel Eck]
Read more with Euractiv
EU Commission seeks details from Meta on data access and election monitoring
The European Commission sent a request for information to Meta under the Digital Services Act (DSA) on Friday (16 August), seeking details on compliance with data access and election monitoring requirements.
