The Rise of Dresden: How a German City is Becoming a European Manufacturing Leader

TSMC, Bosch, Infineon, and NXP revealed their joint venture in 2023 to establish a semiconductor factory in Dresden with 11 B$.


In the heart of the eastern German state of Saxony lies the historic city of Dresden, which is undergoing a remarkable transformation into a thriving European hub for manufacturing.

The city has a long history of manufacturing, dating back to the 18th century, and is home to a number of world-renowned companies, including Volkswagen, Siemens, and Bosch.

In recent years, Dresden has made a concerted effort to attract new manufacturing businesses. The city has invested heavily in infrastructure, such as new roads and railways, and has created a business-friendly environment. As a result, Dresden has become a major hub for the automotive, electronics, and medical technology industries.

In 2021, Dresden was ranked as the 10th most competitive city in Germany by the IMD World Competitiveness Center. The city was praised for its strong infrastructure, skilled workforce, and innovative environment.

In this blog post, we will explore the factors contributing to Dresden’s rise as a manufacturing powerhouse and delve into recent significant investments that are shaping its future.

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Major Investments Shaping Dresden’s Future:

Recent groundbreaking investments have solidified Dresden’s position as a premier European manufacturing hub.

In a groundbreaking move, TSMC, Bosch, Infineon, and NXP revealed their joint venture in 2023 to establish a semiconductor factory in Dresden with 11 B$. This strategic collaboration reinforces the city’s role as a nucleus of semiconductor manufacturing expertise, driving growth and innovation in the sector.

Infineon’s upcoming construction of a €5 billion plant, scheduled for completion in 2026, is set to become the most significant investment ever in the history of the originally Bavarian company.

The new plant, adjacent to the existing location, will employ about 1,000 people, bringing the total workforce in Dresden to more than 4,000. This expansion solidifies Infineon’s position as one of the largest employers in Dresden, contributing to the city’s growing reputation as Silicon Saxony.

Why Dresden ?

Here are some of the factors that are contributing to the rise of Dresden as a European manufacturing leader:

Strategic location: Dresden is located in the heart of Europe, making it an ideal location for businesses that want to access a large market.

Abundant skilled labor: Dresden has a highly skilled workforce, thanks to its strong educational institutions.

Innovative environment: Dresden is a hub for innovation, with a number of research and development centers located in the city.

Government support: The German government is supportive of manufacturing, and offers a number of incentives to businesses that locate in Dresden.

The rise of Dresden as a European manufacturing leader is good news for the city and the region. It will create jobs, boost the economy, and attract new investment. It is also a positive sign for the future of manufacturing in Europe.

In addition to the factors mentioned above, Dresden is also benefiting from the following:

  • The city’s proximity to the Czech Republic and Poland, which are also major manufacturing hubs.
  • The growing demand for electric vehicles, which Dresden is well-positioned to produce.
  • The city’s commitment to sustainability, which is attracting businesses that are looking to reduce their environmental impact.

Read more: TSMC, Bosch, Infineon, and NXP Invest €10 Billion in European Chip Manufacturing

Implications of Dresden cluster effect

The concentration of manufacturing in Dresden could create a cluster effect. This is a phenomenon where the presence of one company in a particular area attracts other companies in the same industry. This can lead to a number of benefits, such as economies of scale, knowledge spillovers, and increased competition.

The implications of the cluster effect for other countries could be mixed. On the one hand, it could lead to job losses in other countries as companies relocate their manufacturing operations to Dresden. On the other hand, it could also lead to increased investment and innovation in the manufacturing sector, which could benefit other countries in the long run.

Here are some of the potential implications of the cluster effect for other countries:

Job losses. As companies relocate their manufacturing operations to Dresden, they may lay off workers in other countries. This could lead to unemployment and economic hardship in those countries.

Investment and innovation. The concentration of manufacturing in Dresden could attract investment and innovation from other countries. This could lead to the development of new technologies and products, which could benefit the global economy.

Competition. The increased competition from companies in Dresden could force other companies to improve their efficiency and productivity. This could lead to lower prices for consumers.

Dependency. Other countries could become more dependent on Dresden for manufactured goods. This could make them vulnerable to supply chain disruptions or political instability in Germany.

Overall, the implications of the cluster effect for other countries are complex and depend on a number of factors. It is important to carefully consider these implications before making any decisions about the future of manufacturing.

In the case of Dresden, the government is taking steps to mitigate the potential negative implications of the cluster effect. For example, they are investing in education and training to help workers develop the skills they need for the new jobs being created. They are also working to improve infrastructure to reduce traffic congestion and housing affordability.

It is too early to say what the long-term implications of the cluster effect will be for Dresden and other countries. However, it is a trend that is worth watching closely.


Dresden’s transformation into a European manufacturing powerhouse is a testament to its rich history, favorable business environment, government support, strategic location, and research ecosystem.

The city’s allure as a manufacturing destination is bolstered by recent monumental investments from industry giants, reinforcing its pivotal role in shaping the future of manufacturing in Europe.

As Dresden continues to evolve and thrive, its success story serves as an inspiration for other regions aspiring to become global manufacturing centers.

Editorial Team
Editorial Team
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