EU approves German bid to make a European TSMC

It will be called ESMC (European Semiconductor Manufacturing Company), which is especially appropriate since world-leading chipmaker TSMC is part of the JV, alongside German companies Bosch and Infineon and Dutch NXP. It was first unveiled a year ago and the European Commission has taken its characteristic time in approving the aid.

“This €5 billion German measure will strengthen semiconductor production capacity in Europe, helping us deliver our green and digital transition and creating opportunities for high-skilled employment,” said European EVP in charge of competition policy Margrethe Vestager. “The measure’s open foundry model will ensure widespread access to power efficient chips, including by smaller companies and start-ups, while limiting any potential distortion of competition.”

Maybe not everyone will agree with Vestager’s assessment. Obscene amounts of public money are being chucked by Western governments at anyone who knows one end of a chip from the other in a bid to geographically diversify semiconductor manufacture. This is fuelled by anxiety about China one day invading Taiwan, where most of the cutting-edge chipmaking currently takes place.

Building a chip fab, as these manufacturing facilities are commonly referred to, is incredibly expensive, hence the state aid. ESMC’s fab will be located in Dresden, where Infineon already has one and where GlobalFoundries, which will presumably be in direct competition with ESMC for foundry business, has its fab. GlobalFoundries must be delighted with this development.

Despite its name and ownership, comparisons with TSMC should be tempered. The most advanced manufacturing node this facility will manage is 12nm, which is several generations behind the best TSMC has to offer. Infineon and NXP focus more on chips for embedded industrial applications and IoT than the kinds of SoCs that gain significant competitive advantage from using the smallest nodes, so it seems ESMC’s capabilities will be adequate for their needs.

“This investment in Dresden demonstrates TSMC’s commitment to serving our customers’ strategic capacity and technology needs, and we are excited at this opportunity to deepen our long-standing partnership with Bosch, Infineon, and NXP,” said Dr. CC Wei, CEO of TSMC, when the JV was first announced. “Europe is a highly promising place for semiconductor innovation, particularly in the automotive and industrial fields, and we look forward to bringing those innovations to life on our advanced silicon technology with the talent in Europe.”

This is the fourth outpouring of state aid approved by the EC under the auspices of the European Chips Act, with Franco-Italian chipmaker STMicroelectronics getting most of it, including a new JV with GlobalFoundries in France. STMicroelectronics also operates in the industrial embedded space so it looks like the EU’s strategy is to augment the region’s strengths in this area, which seems sensible, although the presence of world-leading lithography toolmaker ASML in the Netherlands offers tantalising promise.