TSMC Plans to Build More Factories in Europe, Focusing on AI Chips

In the context of the rapid iteration of semiconductor technology today, TSMC is once again leading the industry trend. According to a report by Bloomberg on the morning of October 14, TSMC has officially started the construction of its first fab in Dresden, Germany, and plans to add more production bases in Europe in the future, aiming to cover a variety of market areas, especially focusing on the artificial intelligence chip market, so as to further expand its global business network. As the world’s top foundry giant, TSMC’s move not only demonstrates its strong strength in cutting-edge process technology, but also indicates that the semiconductor industry is about to usher in a new round of technological innovation.

As the world’s leading chip manufacturer, TSMC’s core production base is still firmly in Taiwan. However, in the face of an increasingly competitive international environment, especially challenges from the United States, TSMC is actively expanding its overseas market shipment capabilities. In the United States, TSMC has pledged to invest more than $65 billion and plans to build three new factories in Arizona to consolidate and strengthen its market position in North America. This new investment strategy will undoubtedly bring more market share and opportunities to TSMC, and it also indicates that the competition with other competitors in the industry will become more intense.

In August this year, TSMC officially launched a 10 billion euro chip manufacturing plant construction project in Dresden, Germany. This is TSMC’s first factory in the European Union. Thanks to the generous support of the German government, the construction of the factory received a 5 billion euro subsidy. This factory, called European Semiconductor Manufacturing Company (ESMC), is a joint venture jointly invested by TSMC, Bosch, Infineon and NXP, in which TSMC holds a 70% stake and the other three companies each hold a 10% stake. The ESMC factory will introduce TSMC’s 28/22nm CMOS and 16/12 FinFET advanced process technologies, and the initial monthly production capacity is expected to reach 40,000 12-inch wafers. The establishment of this new factory will not only strengthen Europe’s semiconductor manufacturing ecosystem, but will also directly create about 2,000 high-tech professional jobs.

TSMC chose to set up a factory in Germany mainly to respond to the growing demand for automotive chips. The ESMC factory is located in an extremely advantageous geographical location, close to Bosch and Infineon, two of the world’s leading automotive electronic parts suppliers. Such a geographical location provides great convenience for the cooperation between TSMC and customers such as Bosch and Infineon. Through close communication and collaboration, TSMC can understand customers’ needs more deeply, so as to provide them with more accurate and efficient services. At the same time, this will also greatly promote TSMC’s market expansion in the field of automotive electronics and win more market share for it in the increasingly fierce competition. It can be said that the establishment of the ESMC factory is not only TSMC’s active response to market demand, but also an important strategic move for it to consolidate its relationship with important customers and expand its market share.

Wu Chengwen, chairman of the Science and Technology Commission of Taiwan Province, pointed out that the AI chip market, especially the part where leading companies such as NVIDIA and AMD are located, will become the most critical link. At the same time, he also emphasized that other highly competitive AI semiconductor companies may also bring new business opportunities to TSMC. Wu Chengwen further mentioned that “these companies may also enter the European market, so TSMC is actively looking for the right opportunity to plan and build the next few wafer fabs in Europe.”

Although TSMC maintains its leading position in the AI chip market with its advanced manufacturing processes and excellent packaging technology, the sharp rise in AI demand has also brought severe challenges to its production capacity. At the 2024 Technology Conference, TSMC revealed that due to the strong growth in AI demand, AI chip demand is expected to achieve an annual growth rate of 2.5 times. Even if TSMC plans to expand its 3nm production capacity by more than 3 times in 2024, this move will still be difficult to meet the huge market demand for AI chips. Therefore, accelerating the pace of expansion and increasing production capacity is an urgent task for TSMC.

From the perspective of market expansion, TSMC’s series of actions are undoubtedly aimed at further broadening the boundaries of its global business. Europe, as one of the core regions of the global economy, not only has huge market demand, but also a mature and complete industrial chain. By adding wafer fabs in Europe, TSMC can respond more effectively to the needs of the European market and deepen its cooperation with local customers. At the same time, with the rapid development of artificial intelligence technology, the demand for artificial intelligence chips in the European market is continuing to rise. TSMC’s strategic focus on the artificial intelligence chip market is precisely to accurately capture the development trend of this market and follow the trend to make layouts.

However, TSMC’s expansion in Europe is not smooth sailing, and it still faces many factors that need to be deeply evaluated. The company must carefully weigh whether to continue to expand its existing Dresden base in Germany or to build new factories in other potential regions within the EU. This decision will depend on many factors, including market demand, government policies, and supply chain stability. However, it is foreseeable that as the global semiconductor market continues to change and develop, TSMC’s expansion plan in Europe will continue to adjust and improve.