EU approves 5 bln euro German aid for ESMC semiconductor plant in Dresden

The European Commission said on Tuesday it had approved 5 billion euros ($5.5 billion) in German state aid to support a new microchip plant in Dresden for the European Semiconductor Manufacturing Company (ESMC).

The award for the project led by Taiwan’s TSMC is the biggest state subsidy granted so far under the EU Chips Act, and Germany’s first.
“This is a true win-win situation for all of us,” EU Commission’s President Ursula von der Leyen said during the inauguration ceremony for the plant.

German Economy Minister Robert Habeck praised the decision and said his government would maintain the fast pace of the project, which targets production in 2027, and finalise funding.

ESMC is a joint venture led by TSMC, the world’s largest contract chipmaker, with European chipmakers Bosch, Infineon and NXP each taking a 10% stake.

The Dresden facility is forecast to cost 10 billion euros in total to build.

“The facility will operate as an open foundry, meaning that any customer – including but not limited to the three other shareholders besides TSMC – can place orders for the production of specific chips,” the Commission said in a statement announcing the subsidy approval.

Although the ESMC plant will be making generations of chips slightly behind the most advanced technology used in AI chips and smartphones, it will add capacity in the range that is most important for automotive and other industrial applications key to European manufacturing.

The plant should improve Europe’s resiliency against a future chip shortage of the type experienced during the COVID pandemic.