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Forward-looking: In its effort to become a global tech company, TSMC has long planned to open new plants outside of its Taiwan base. The chip foundry has now confirmed that it will soon begin constructing its first European fab, with support and funding from third-party manufacturers.
TSMC announced last year that it is investing €10 billion in a new chip manufacturing plant in Dresden, the capital city of the German state of Saxony. Construction will start soon, with one of Germany's most populous cities set to host the company's first manufacturing plant in Europe.
The chipmaker stated that the groundbreaking ceremony for the new Dresden plant will be held on August 20. TSMC Chairman and CEO C.C. Wei, fab customers, and German government representatives are expected to attend the ceremony. The new venture, known as the European Semiconductor Manufacturing Company (ESMC), marks a significant milestone in TSMC's plans to expand beyond Taiwan.
According to TSMC, the ESMC project is progressing as planned, with construction slated to begin by the end of 2024. The Asian corporation is partnering with three European chip companies: NXP, Infineon, and Bosch. Each partner will reportedly own 10 percent of the plant, contributing €500 million to the overall €10 billion investment announced by TSMC.
The ESMC plant will produce chips based on older process nodes such as 28nm, 22nm, 16nm, and 12nm. While these established technologies cannot create cutting-edge, AI-capable microchips, they are well-suited for manufacturing products for automotive applications, IoT, and other industries where reliability and cost-effectiveness are paramount.
Once completed in 2027, ESMC is expected to manufacture 40,000 silicon wafers each month. Although these chips are intended for "cheaper" industrial applications, they will likely be more expensive than similar products made in Taiwan.
TSMC's CEO confirmed this issue a few months ago, stating that factors such as inflation, energy costs, and other "operational considerations" will likely drive up prices. These additional costs will be "shared" with fab customers, as the corporation is committed to maintaining a long-term gross margin of 53 percent. Despite these economic challenges, TSMC's expansion plans outside Taiwan are progressing. The company and its partners are already preparing for potential future geopolitical scenarios.