TSMC's investment in Germany focused on sustainability: Analyst

Taipei, Aug. 21 (CNA) Taiwan Semiconductor Manufacturing Co.'s (TSMC) investment in Dresden is aimed at strengthening corporate sustainability by taking advantage of green energy development in Germany, according to a veteran market information analyst in Taiwan.

"In Germany, renewable energy accounts for about 50 percent of all energy consumption, which could help TSMC achieve the goal of boosting renewable energy use to 100 percent in 2040," said Ray Yang (楊瑞臨), international strategy development consulting director at the government-sponsored Industrial Technology Research Institute (ITRI).

According to Yang, wind power makes up 27 percent of Germany's total electricity consumption, solar energy accounts for another 12 percent, and bioenergy represents almost 10 percent.

"TSMC is expected to build its advanced wafer fab in Germany as a sustainable facility, and the experience can be copied by its partners," Yang said in explaining the new fab's focus on building strengthening sustainability.

TSMC broke ground on a 12-inch wafer fab in Dresden on Tuesday (Germany time) through a joint venture called European Semiconductor Manufacturing Co. (ESMC), which includes Robert Bosch GmbH, Infineon Technologies AG and NXP Semiconductors N.V.

Total investment is estimated to top 10 billion euros (US$11.1 billion) with TSMC taking a 70 percent stake and each of its three partners taking 10 percent. The EU Commission approved 5 billion euros in subsidies to the project under the EU Chips Act.

Construction of the new facility will start later this year and mass production is scheduled to start in 2027, using TSMC's 28/22 nanometer planar CMOS and 16/12nm FinFET manufacturing processes to roll out 40,000 wafers a month.

According to TSMC, ESMC will uphold its standards of sustainability and environmental protection, and use existing and cutting-edge techniques to optimize conservation with energy-efficient construction and water reclamation.

Aimed at automotive clients

Liu Pei-chen (劉佩真), a researcher at the Taiwan Institute of Economic Research's Taiwan Industry Economics Database, said TSMC's Dresden fab will use mature processes to roll out chips for automotive electronics clients in Europe.

TSMC is expected to leverage Germany's strong car manufacturing capabilities to penetrate the European automotive market, Liu said.

Germany's existing semiconductor supply chain will also provide a sound foundation that enables TSMC to speed up the pace at which it develops its new facility and strengthens its future operations.

Liu said that while Europe is not TSMC's largest market, it was necessary for TSMC to make the investment in Dresden to diversify risks amid geopolitical tensions, after many clients could not access semiconductors, many of which are produced in Asia, during the COVID-19 pandemic.

According to TSMC, North America is its largest market, accounting for 65 percent of total sales in 2022 in the second quarter, while Europe, the Middle East and Africa accounted for only 4 percent.

Japan accounted for 6 percent and China represented about 16 percent in the second quarter.

TSMC's suppliers to follow suit

Several TSMC suppliers have expressed the willingness to locate capacity in Germany or other European countries to support TSMC's new fab.

Margaret Kao (高新明), chairman of systems solutions provider Marketech International Corp., said Marketech will follow TSMC to Germany and as it has in the United States and Japan to support TSMC fabs in those two countries.

Jeffery Pan (潘重良), chairman of Topco Scientific Co., which provides chemicals for semiconductor production, said his company is studying the feasibility of setting up a foothold in Europe and could set up an office in Dresden and a warehouse in the Czech Republic.

Materials Analysis Technology Inc., which provides inspection services to the semiconductor industry, said it will set up a lab in Europe after setting up a similar facility in Arizona, according to company chairperson Hsieh Yong-fen (謝詠芬).

For its part, wafer handling services supplier Gudeng Precision Industrial Co. said it will follow TSMC in expanding globally to provide ongoing support to the chipmaking giant.