The European Commission has approved a €5 billion German measure to support the European Semiconductor Manufacturing Company (ESMC) in building and operating a microchip manufacturing plant in Dresden. ESMC is a joint venture between Taiwan Semiconductor Manufacturing Company (TSMC), Bosch, Infineon, and NXP. This measure will enhance Europe’s security of supply, resilience, and digital sovereignty in semiconductor technologies, aligning with the goals of the European Chips Act Communication. Additionally, it will contribute to the digital and green transitions.
Germany has informed the Commission about its plan to support ESMC’s project in building and operating a new semiconductor production facility in Dresden, Germany. The project aims to meet the demand for automotive and industrial applications.
The new large-scale manufacturing facility supported by the measure will produce high-performance chips. These chips will be based on 300mm silicon wafers with node sizes ranging from 28/22nm to 16/12nm. The technology used will be field-effect transistor (‘FinFET’) technology, allowing the integration of multiple additional features into one chip. The chips produced will offer improved performance while also reducing total power consumption. The plant is expected to be operating at full capacity by 2029 and is projected to produce 480,000 silicon wafers per year.
The facility will serve as an open foundry, allowing any customer, including the three other shareholders aside from TSMC, to place orders to produce specific chips. This operating model is crucial for the broader EU ecosystem, especially considering ESMC’s commitments to offer dedicated support to European small and medium enterprises (SMEs) and startups, enhancing their expertise and capabilities. Additionally, the facility will grant special access to its production capacities for SMEs and European universities, further promoting research and knowledge creation within Europe.
The Commission evaluated the German measure according to EU State aid rules, specifically Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU). This article allows Member States to provide aid to support the growth of specific economic activities under certain conditions and in accordance with the principles outlined in the European Chips Act Communication.
The Commission found that:
- The measure aims to boost economic activities by establishing a new mass-production facility for innovative technologies and chips in Europe.
- The facility is the first of its kind in Europe. Currently, there is no comparable mass-production facility for the specific technology features offered. ESMC will be the first open foundry to produce silicon wafers with 28/22nm and 16/12nm technology nodes, using FinFET technology with logic, mixed-signal, radio frequency, and embedded non-volatile memory technology processes. These specific technologies set it apart from existing capacity and complement the production capacities needed by European customers.
- The aid has an ‘incentive effect’, as the beneficiary would not fund this investment without public support.
- The measure has a limited impact on competition and trade within the EU. It is necessary and appropriate to ensure the resilience of Europe’s semiconductor supply chain. In addition, the aid is proportionate and limited to the minimum required based on a proven funding gap (i.e. the aid amount necessary to attract the investment that otherwise would not take place). Finally, ESMC has agreed to share potential profits beyond current expectations with Germany.
- The measure has broad positive effects on the European semiconductor ecosystem. It contributes to strengthening Europe’s security of supply, in particular by setting up an open foundry providing access for European customers, including SMEs and start-ups. It will also enable additional support for European universities. Furthermore, ESMC has committed to complying with priority-rated orders to produce crisis-relevant products in Europe in case of a crisis, as defined in the EU Chips Act Regulation. The Commission also took note that ESMC has committed to applying to be recognised as an Open EU Foundry under the EU Chips Act Regulation and will comply with all obligations linked to this status, including the commitment to invest in continued innovation in the EU to achieve concrete advances in semiconductor technology, by preparing next-generation technologies as well as investing in the Union’s talent pipeline.
The Commission approved the German measure under EU State aid rules on this basis.
