TSMC and Intel’s European Chip Dreams Put on Hold as Subsidy Approvals Stumble

This year, Taiwan Semiconductor Manufacturing Company (TSMC) and Intel both announced plans to establish semiconductor factories in Germany. TSMC will collaborate with Bosch, Infineon, and NXP Semiconductors to invest in the European Semiconductor Manufacturing Company (ESMC) located in Dresden, Germany. Meanwhile, Intel plans to build two new wafer fabrication plants in Magdeburg. One of the key reasons for selecting Germany as the location for these new plants is the prospect of substantial government subsidies.

The subsidies TSMC and Intel are set to receive for their new wafer fabrication plants in Europe stem from two main sources: the European Union itself, as part of the European Chips Act passed in July, and the governments of individual countries. The German government has already promised substantial subsidies to TSMC and Intel, approximately 5 billion and 10 billion euros, respectively.

According to ComputerBase, the Federal Constitutional Court of Germany recently ruled that the federal government’s reallocation of budget funds is unconstitutional. This ruling also involves subsidies for semiconductor companies. As a result, the approval of related funds has come to a standstill, casting uncertainty over these projects. The subsidies might be re-evaluated, potentially leading to reductions or even cancellations.

Should TSMC and Intel fail to receive timely government funding, they may need to increase their capital expenditure for the new wafer fabrication plant projects, reallocate funds from other projects, or possibly scale down the project scope, delay construction progress, or seek other investors. Industry insiders have expressed concern that if the subsidy promises are not fulfilled, it could significantly impact the production and operational strategies of TSMC and Intel.