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TSMC to help Europe break its Asia chip dependency



In contrast to Dutch manufacturing equipment maker ASML’s position at the center of the US-China trade and technology conflict, most European semiconductor makers are maintaining a low profile.

For those who have not been following the issue, Netherlands-based ASML has a monopoly on the most advanced semiconductor lithography equipment (EUV), which it is not permitted to sell to China under US export restrictions.

Europe’s largest semiconductor makers are Germany’s Infineon, Switzerland-headquartered STMicroelectronics and the Netherlands’ NXP, which rank 9th, 10th and 12th worldwide in terms of sales. In the second quarter of 2023, Infineon’s sales were 35% as large as industry leader Intel’s.

In July, on a visit to the Inter-University Microelectronics Center (IMEC) in Belgium, European Commission President Ursula von der Leyen said, “We need to reduce our dependency on too few suppliers from East Asia. And we actively have to de-risk our supply chains for chips – it is vital.”

The Europeans think their semiconductor industry is too small and, in fact, data from market research and industry organizations indicate that only 5% of global semiconductor production capacity is based in Europe and that European companies account for only 9% of global chip sales. Europe buys about 20% of the world’s semiconductors.

With this in mind, von der Leyen said, “We need to promote the design, testing and production [of semiconductors] here in Europe. For that, the Chips Act is the game changer.”


That was a reference to the European Chips Act, which was adopted on July 25. In the words of the European Commission, it “will mobilize more than 43 billion euros (US$45.5 billion) of public and private investments and set measures to prepare, anticipate and swiftly respond to any future supply chain disruptions, together with Member States and our international partners.”

The European Chips Act aims to:

  • Strengthen Europe’s research and technology leadership towards smaller and faster chips;
  • Build and reinforce capacity to innovate in the design, manufacturing and packaging of advanced chips;
  • Address the skills shortage, attract new talent and support the emergence of a skilled workforce;
  • Put in place a framework to increase production capacity to 20% of the global market by 2030; and
  • Develop an in-depth understanding of the global semiconductor supply chains.

More specifically, it entails: 

  • Investments in next-generation technologies;
  • Providing access across Europe to design tools and pilot lines for the prototyping, testing and experimentation of cutting-edge chips;
  • Certification procedures for energy-efficient and trusted chips to guarantee quality and security for critical applications;
  • A more investor-friendly framework for establishing manufacturing facilities in Europe;
  • Support for innovative start-ups, scale-ups and SMEs in accessing equity finance;
  • Fostering skills, talent and innovation in microelectronics;
  • Tools for anticipating and responding to semiconductor shortages and crises to ensure the security of supply; and
  • Building semiconductor international partnerships with like-minded countries.

All that should keep EU bureaucrats busy but might be enough only to keep pace – not catch up – with technology and workforce development, market security measures, capacity additions and industry subsidies in the US, Taiwan, South Korea, Japan and China. But it needs to be done and should make a substantial future contribution to Europe’s economy.

On August 8, TSMC, Bosch, Infineon and NXP announced plans to establish a joint venture known as the European Semiconductor Manufacturing Company (ESMC). Situated in Dresden, Germany, it will provide semiconductor manufacturing services for the automotive, industrial (including IoT, or internet of things) and other economic sectors. One of the world’s largest semiconductor manufacturing complexes is already in Dresden.

Headquartered in Taiwan, TSMC is the world’s largest and most technologically-advanced integrated circuit (IC) foundries. It is the most prominent of von der Leyen’s “too few suppliers from East Asia” upon which Europe now depends. Bosch is a leading German supplier of automotive, industrial, IoT and other technology and services.

TSMC will own 70% of the ESMC joint venture and its three local partners – which will also be its main customers – will own 10% each. The total investment is expected to exceed 10 billion euros ($10.6 billion), including equity, bank borrowings and subsidies from the EU and German government and falls within the framework of the new European Chips Act.

Construction of a wafer fabrication facility (fab) with a monthly production capacity of 40,000 300mm (12-inch) wafers per month is scheduled to start in the second half of 2024. The scale is similar to that of TSMC’s operations in Nanjing, China, and its joint venture in Japan.

TSMC will operate the fab, utilizing its 28/22 nanometer (nm) planar CMOS and 16/12nm FinFET process technology. Most German semiconductors are fabricated at these process nodes. Production is scheduled to commence by the end of 2027.


TSMC deputy spokesperson Nina Kao told electronic engineering trade paper EE Times that “Bosch, Infineon and NXP are all long-time TSMC customers and key European players in the automotive segment and industrial semiconductor supply chain.” ESMC will make chips that would otherwise be made in Taiwan.

The production start date might seem less than urgent, but is probably realistic. On September 26, The Wall Street Journal reported that Intel’s heavily-subsidized fab construction project in Germany faces delays due to an acute shortage of technicians, high energy prices and “an at-times Byzantine bureaucracy.” Production is slated to begin four or five years from now.

By the end of the decade, Intel plans to build two leading-edge fabs in Magdeburg, a Germany city between Hanover and Berlin, to make Intel products and serve Intel foundry customers. The total investment is expected to exceed 30 billion euros ($31.7 billion) – “the single largest foreign direct investment in German history,” according to Chancellor Olaf Scholz.

“Along with Intel’s existing wafer fabrication facility in Ireland and its recently announced assembly and test facility in Poland,” says Intel, “the new wafer fabrication site in Magdeburg will create a first-of-its-kind, leading-edge end-to-end semiconductor manufacturing value chain in Europe, serving European customers and helping to fulfill the EU’s ambitions for a more resilient semiconductor supply chain.”

There are currently no European companies among the world’s leading semiconductor foundries, memory chip makers or makers of cell phone, computer and AI processors. But over the next several years, TSMC and Intel will add foundry services and processors to Europe’s production base. The Europeans can also buy memory chips from America’s Micron Technology if they don’t want to overly depend on South Korea.

Still investing in Asia

That said, the Europeans are adept at making automotive ICs. According to market research firm TechInsights, Infineon, NXP and STMicro ranked first, second and third worldwide in terms of sales in 2022, with a combined global market share of 33%. They also have a major presence in other industrial-use ICs.

In June, STMicro announced a joint venture with China’s Sanan Optoelectronics to make SiC (Silicon Carbide) power semiconductors in Chongqing for electric vehicle, industrial and alternative energy (solar and wind) applications. The total investment is expected to reach about 3 billion euros ($3.2 billion) and production is scheduled to start by the end of 2025.


In August, Infineon announced plans to spend up to 5 billion euros ($5.3 billion) on a large additional expansion to its fab in Kulim, Malaysia, with an aim of raising its share of the global market for SiC power devices from 12% to 30% by 2030.

This investment decision is supported by design wins and prepayments from six customers in the auto industry, three of them from China; four customers in renewable energy, including three Chinese photovoltaic and energy storage companies; and a capacity reservation for Schneider Electric.  

These projects are driven by market dynamics, not the European Chips Act, and they were launched without interference from Brussels or Washington, DC.

Follow this writer on Twitter: @ScottFo83517667

Source: Asia Times


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