Taiwan’s Chipmaker TSMC Says ‘No Plans’ for German Expansion Yet

The logo of Taiwan Semiconductor Manufacturing Co. (TSMC) at its headquarters in Hsinchu, Taiwan, on Jan. 19, 2021. Ann Wang/Reuters

Taiwan Semiconductor Manufacturing Company (TSMC) said it has no plans to expand in Germany yet, following reports that the firm was in discussions with suppliers about potentially building its first European plant.

The Financial Times earlier reported that TSMC, the world’s largest contract chipmaker, is in “advanced talks” with suppliers to build a plant in Dresden, Germany, citing unnamed sources “familiar with the matter.”

The report states that TSMC’s senior executives will be visiting Germany next year to discuss the level of government support for the plant and the ability of the local supply chain to meet its needs.

The talks with suppliers will focus on whether they can make investments to support the prospective plant, and if approved, they will manufacture 22-nanometer and 28-nanometer chip technologies, according to the report.

But TSMC did not confirm if discussions were held regarding its expansion in Germany.

“While we do not rule out any possibilities, we have no plans at this time,” the company told The Epoch Times on Dec. 23 without elaborating further.

The company said last year that it was in “early talks” with Germany about expanding its operations there. TSMC said they would weigh aspects like government subsidies and customer demand before making a decision.

The Taiwanese company has also begun construction on its first Japan plant in Kumamoto Prefecture. Japanese lawmaker Yoshihiro Seki said on Friday that TSMC was considering building a second plant in Japan.

“I believe TSMC is looking into further investments in Japan. We need to create an environment that would make them think they want to do advanced projects with us,” Seki told Reuters.

TSMC said it did not rule out any possibility of building a second fab in Japan but that there were no concrete plans at the moment.

President Joe Biden (C) greets workers as he tours the TSMC Semiconductor Manufacturing Facility in Phoenix, Arizona, on Dec. 6, 2022. Brendan Smialowski/AFP via Getty Images

Expansion in the US

The chipmaker is also constructing a plant in the U.S. state of Arizona. TSMC founder, Morris Chang, said on Nov. 2 that his company is bringing its leading-edge 3-nanometer chip production process to its upcoming plant in Arizona.

Taiwan’s long dominance in global chip manufacturing has been called the island’s “silicon shield” against a Chinese invasion. Led by TSMC, over 90 percent of the world’s advanced chips are made in the self-ruled island and over half of the world’s semiconductor foundry production.

China and the rest of the world critically rely on Taiwan’s advanced chip production capabilities. Taiwan-made semiconductors are integral to nearly every aspect of modern life, from smartphones to planes.

As a critical chokepoint for a vital commodity, any disruption to the island’s operation would be catastrophic to the global supply chains and world economy, including China’s.

In this regard, many fear that TSMC’s plan to produce leading-edge chips in the United States would undermine the island’s security. However, experts believe TSMC will keep its most advanced technologies on the island.

Hsu Chin-Huang, an IT expert, told The Epoch Times on Nov. 25 that TSMC has an “N minus 1” policy, meaning it will always keep its most advanced iteration of chip technology in Taiwan. Hsu said that this principle has not changed.

He said if TSMC brings its 3 nm process to the United States, the company can mass-produce a more advanced iteration in Taiwan, such as 2 nm or 1 nm chips.

Generally, in semiconductor fabrication, the smaller the process technology, the more advanced the chip. The smaller the technology node, the higher the transistor density and the lower the chip power consumption, resulting in higher performance.

However, the smaller manufacturing process requires more advanced materials and equipment and will incur a greater cost in research and development, and production.

“According to TSMC’s layout, the production of 3 nm chips in the United States is mainly to supply products that Washington considers more sensitive and must be manufactured in the country. Taiwan will still maintain its 3nm production capacity, and Taiwan’s production costs will be lower,” Hsu said.

“Suppose the unit price of Taiwan-made chips is lower than U.S.-made. In that case, other countries will still prioritize buying from Taiwan so the U.S.-side production won’t impact Taiwan’s local production capacity.”

Rita Huang, Sean Tseng, and Reuters contributed to this report.