TSMC to establish new semiconductor plant in Germany as part of global expansion

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s preeminent chipmaker, is in the process of establishing a new semiconductor fabrication plant in Dresden, Germany. This initiative comes as part of TSMC’s broader strategy to enhance its global footprint, addressing the burgeoning interest and investment driven by artificial intelligence (AI) technologies. This expansion is not isolated to Germany; the company is also orchestrating the construction of manufacturing sites in the United States and Japan.

The announcement was brought to public attention by Taiwan’s National Science and Technology Council Minister, Wu Cheng-wen, during a segment on Bloomberg TV. Wu confirmed that the groundwork for the Dresden facility had already begun, and plans to inaugurate additional plants in various international locations are underway.

The Dresden plant represents a significant financial commitment, with TSMC investing approximately $10.9 billion into its construction. This facility is anticipated to be fully operational by the close of 2027. Importantly, the project is being supported by substantial state subsidies, which cover nearly 50% of the costs involved.

TSMC’s motivation for this expansion is multifaceted. One of the primary driving factors is the increasing demand for advanced chips, which are critical in AI technology applications. Furthermore, the expansion serves as a strategic response to geopolitical tensions with China, where recent years have seen a range of import-export restrictions and tariffs that have complicated international business operations.

This European expansion aligns with TSMC’s ambitions to cultivate stronger collaborations within the European Union. Minister Wu suggested potential partnership opportunities with burgeoning European chip designers, such as Germany’s Black Semiconductor and the Netherlands’ Axelera AI. However, the company remains conscious of potential geopolitical pressures, particularly from the United States.

In addition to its European efforts, TSMC remains solidly committed to its existing expansion initiatives across the United States. With an allocation of $65 billion, TSMC is currently constructing three state-of-the-art fabrication plants in Arizona. Although these builds signify a substantial investment overseas, TSMC has noted that a majority of its production will continue to take place in Taiwan.

Financially, TSMC is experiencing a substantial surge in profitability, projected to report a 40% increase in its net profit for the third quarter to an estimated T$298.2 billion ($9.27 billion). This positive fiscal outcome is largely attributed to heightened demand for AI chips from major technology corporations such as Apple, Nvidia, and Qualcomm, all of which are leveraging TSMC’s advanced process technologies for their latest product offerings.

This financial upswing has positively influenced TSMC’s market valuation. The Taipei-listed stock of the company has appreciated by 77% this year, significantly outpacing the broader market’s 28% gain. This growth reflects the pivotal role TSMC plays within Taiwan’s economy, colloquially earning it the reputation of “the sacred mountain protecting the country.”

Despite its remarkable performance, TSMC faces an emerging challenge from tech giant Intel, which is attempting to revitalise its position within the semiconductor landscape. Intel’s efforts, however, have not yet produced the desired competitive impact, as the company contends with financial setbacks in its contract manufacturing ventures aimed at rivaling TSMC’s dominance.

TSMC’s forthcoming earnings call, scheduled for the early hours of Thursday, will provide further clarity on its financial projections for the coming quarter and update its annual capital expenditure plans. The company has already adjusted its revenue forecast upward and anticipates capital expenditures to range between $30 billion and $32 billion for the year.

Source: Noah Wire Services