Another colossal investment with state aid comes to confirm the declared goal of the German government to “liberate” Germany and Europe from dependence on Asia and the USA. This is again the chip industry, which is considered the most important component in the world of industry. They are needed in the automotive industry, for computers, but also in many other everyday devices, such as hair dryers. As the Minister of Economy Robert Hambeck announced, next year the first phase of construction of a new semiconductor production plant of the Taiwanese chip company TSMC will begin with the cooperation of the technology companies Bosch and Infineon and the Dutch chip manufacturing company NXP.

The traumatic experience from the pandemic

As with the previous time with Intel, Germany will also subsidize this colossal investment with five billion euros that will be paid by the German taxpayer. Investments from the company are expected to double. The giant TSMC announced yesterday after a board meeting in Taipei, that the semiconductor factory in Dresden is expected to be ready by 2027 with the total investment exceeding 10 billion euros. The chips to be manufactured in Dresden are intended for the needs of the automotive industry, as shown by all three industries participating in the project. All three will acquire a 10% stake each in the newly formed joint venture ESMC (European Semiconductor Manufacturing Company). Taiwan’s TSMC will remain at 70%. The plant is expected to break ground in the second half of 2024 and production will begin sometime in 2027. The traumatic experience of shortages in the semiconductor supply chain during the pandemic is still fresh. “Germany is emerging as a key player for semiconductor production in Europe,” Chancellor Scholz emphasized yesterday. “This is important for the future viability of the country after production losses in the auto industry, because, among other things, our orders did not come from Asia.”

Taiwan’s TSMC is the third giant to decide to build a chip production unit in Germany. Just two months ago, the American company Intel announced the construction of a 30 billion euro megafab factory in Magdeburg. At the beginning of 2023, the American company Wolfspeed decided to invest 2.7 billion euros in the production of silicon carbide semiconductors for the needs of electric cars. Also one of the world’s largest manufacturers of discrete semiconductor components and passive electronic components, the American Vishay, is to build a factory in the small town of Itzehoe, in the state of Silesia-Holstein. South Korean electronics maker Samsung is also considering building a chip factory in Europe, perhaps in Germany. This was also the subject of Chancellor Olaf Solz’s visit to Seoul at the beginning of the summer.

“A friendlier culture of welcoming foreigners”

As with any investment, there is another side to the coin. Christoph Schmidt, president of the Leibniz Institute for Economic Research, was cautious about the subsidies and whether they would give a long-term boost to the German economy. Speaking to today’s Rheinische Post he said that it would probably be wiser “for the financial means to be invested in the research and development of storage technologies or infrastructure for the import and transport of hydrogen”. Marcel Fratcher, president of Germany’s German Research Institute (DIW), sees investments in the two semiconductor factories of Intel in Magdeburg and TSMC in Dresden as an “uncertain bet on the future”. In Tagesspiegel and focusing on the 15 billion euros that will come from the German taxpayer, he noted that “the investment will also pay off in other sectors of the economy only if innovative new jobs are created.” Fratcher also pointed out an extremely important point that makes foreign workers avoid the East German states as a place of residence and work. The lack of foreigner-friendly culture. “Investment in these states will help them develop their own economic model, but for that they need a friendlier culture of welcoming foreigners, better infrastructure and more investment in education and innovation.”

Carsten Schneider, representative of the German government for the East German states, evaluates the investment through the lens of upgrading and on a human level, but will also give a boost to the region in terms of innovation. “The heart of semiconductor production beats in eastern Germany,” he told RND network publications. “With TSMC’s decision, for the first time Dresden hosts the company’s first semiconductor manufacturing unit in Europe.