TSMC in Germany: EU’s Chip Dreams Come Up Short?

One of the most significant setbacks for the Chips Act has been TSMC's decision to build a chip factory in Germany. TSMC is the world's leading chipmaker, and its investment in Germany is a major coup for the EU. However, the factory will not be operational until 2027, and it will only produce 28-nanometer chips. This is far behind the 2-nanometer chips that the EU hopes to produce by 2030.


The EU Chips Act, a novel industrial policy tool for the European Union, has been generating results, albeit not in line with the initial ambitious objectives envisioned by its proponents. Mathieu Duchâtel, Director of International Studies at Institut Montaigne, examines the impact of the Chips Act on Europe’s semiconductor industry and reflects on the recent developments, notably involving the Taiwanese semiconductor giant TSMC’s investment in Germany.

The Uncertainty Surrounding TSMC’s Plans

For two years, doubts lingered about whether TSMC, a prominent semiconductor company based in Taiwan, would establish a fabrication facility (fab) in Germany. Factors like high production costs, potential cultural clashes, and difficulties in recruiting engineers were cited as reasons for the uncertainty. However, the recent announcement of a €10 billion investment by TSMC in a Dresden foundry, partially subsidized by the German government in partnership with Bosch, Infineon, and NXP, has quashed these speculations. This not only benefits the semiconductor cluster in Saxony but also holds promise for Europe’s semiconductor ecosystem and the stability of its automotive supply chain.

Also Read: TSMC’s US Expansion: A Boon or a Burden?

Deviation from Initial Goals

The Chips Act’s outcomes differ from the lofty goals initially set by Thierry Breton, EU industry chief. Breton’s aspirations included achieving a 20% share of the global semiconductor market by 2030 (up from the current <10%), producing 2-nanometer chips on European soil (a stark contrast to the current 14-nanometer capabilities of Europe’s most advanced foundry), and pursuing “technological sovereignty.”

Challenges and Exemptions

Achieving the goal of doubling Europe’s semiconductor market share seems unlikely. The Chips Act allows exemptions to state aid prohibitions under the condition that a fab project is deemed “first-of-a-kind.” This concept, though somewhat vague, has softened the EU’s usually stringent competition regulations. Recent examples include a €292.5 million subsidy from Italy for an STMicroelectronics plant and €2.9 billion in French state aid for STMicroelectronics and Global Foundries.

TSMC’s Impact and Strategic Decisions

TSMC’s investment, while significant, might not be sufficient to rival Taiwan’s semiconductor dominance. Though the Chips Act has catalyzed investments that might not have occurred without it, Taiwan and South Korea’s semiconductor advancement continues to outpace Europe. TSMC’s choice of setting up in Germany, focusing on mature technologies like 28/22 nanometers and responding to automotive and industrial needs, showcases a strategic deviation from Breton’s call for 2-nanometer technology.

Global Industrial Strategies and TSMC’s Expansion

TSMC’s recent global strategic shift involves building fabs in the USA, Germany, and Japan, leveraging state aid packages to bridge cost gaps with Taiwan. This departure is noteworthy, considering TSMC’s traditional regional focus. However, TSMC’s core operations and production volume will remain centered in Taiwan.

Balancing “Technological Sovereignty” and Economic Security

The term “technological sovereignty” might be misleading, as the recent developments suggest a more modest revitalization of Europe’s industrial policy, perhaps better described as “economic security.” TSMC’s subsidized investment in a sector prone to geopolitical risks and natural disasters could enhance Europe’s economic security. Nevertheless, it won’t lead to the same supplier network migration as seen in TSMC’s Arizona venture.

Cluster Effects and Regional Concentration

While the Chips Act fosters Europeanization of semiconductor supply chains, particularly beneficial for Europe’s resilience, the geographical concentration of investments, notably in Germany, raises concerns about uneven distribution. To counterbalance this, public policies should nurture other semiconductor clusters around Eindhoven, Leuven, and Grenoble. Additionally, addressing the impending talent crisis, which poses a substantial threat to European industry, requires prompt and decisive action.


The EU Chips Act’s impact has been multifaceted, not quite aligning with its initial grand ambitions. While the Act has catalyzed investments and revived certain aspects of industrial policy, achieving full technological sovereignty and substantial market share remains a considerable challenge. TSMC’s entrance into Germany brings benefits but also underscores the complexity of reconciling strategic visions with commercial realities. The focus should shift to fostering cluster effects and addressing imminent talent shortages to secure Europe’s position in the semiconductor landscape.

Editorial Team
Editorial Team
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