The expansion of Taiwan-based TSMC into Europe is going ahead as planned.
The world’s largest contract chipmaker today broke ground on its first European plant, in the German state of Saxony’s capital city of Dresden. At the same time, the European Commission gave its crucial approval to Germany’s €5 billion ($5.55 billion) in state aid for the $11 billion project—the biggest sum so far to be doled out under the EU’s Chips Act rulebook, which took effect last year.
Europe’s Chips Act aims to double the region’s share of global chip production to 20% by 2030 (the U.S. Is targeting a similar share by the same date, though advanced chip production specifically). However, the projects in Europe that have been approved thus far are not on the sexier, cutting-edge-AI-chip end of the spectrum. These are rather all about industrial applications, particularly automotive—one of Europe’s traditional strengths and one that it would dearly like to preserve, which means building a local supply chain for semiconductors.
European Commission President Ursula von der Leyen, who has just secured a second term, said this morning that there were also timely benefits for the Taiwan Semiconductor Manufacturing Company: “At a time of growing geopolitical tensions, TSMC will also benefit from geographic diversification to Europe, better access to our European strengths, like automotive…and to our unique single market.”
For its new expansion, TSMC has set up a joint venture—very imaginatively called European Semiconductor Manufacturing Company, or ESMC—with Europe’s Bosch, Infineon, and NXP. TSMC, which owns 70% of the JV, will operate the plant.
ESMC intends to be fully up-and-running by 2029, churning out 480,000 silicon wafers annually. In a likely boon to the wider European tech sector, the Dresden facility will be an “open foundry,” meaning anyone can contract it to make chips. Again, we’re talking about relatively mundane chips here, though EE News Europe reports that Europe’s politicians and AI sector are keen for ESMC to turn its attention to high-performance chips as soon as possible.
Until now, the biggest beneficiary of EU Chips Act subsidies has been Switzerland-based STMicroelectronics. In April last year, the Commission nodded through €2.9 billion in French state aid for a chip plant that’s a collaboration between STMicro and GlobalFoundries; approval followed in May this year for an STMicro factory in Sicily, which will enjoy €2 billion in Italian state aid. (The Commission also approved a relatively modest €292.5 million in Italian cash for STMicro’s Sicilian operations in 2022, under Italy’s post-pandemic Recovery and Resilience Plan.)
But while ESMC now holds the record for Chips Act subsidies, the big decision everyone’s waiting for is Commission approval for the nearly €10 billion that the German government promised to Intel last year for the construction of two new plants in Magdeburg, in the state of Saxony-Anhalt. The Magdeburg facility, which would also be an open foundry, is set to cost around €30 billion in total—and it would produce advanced chips.
However, two rather significant problems have come up since Berlin made that promise. First, a budget crisis erupted in Germany at the end of last year, putting many subsidies in doubt. And then Intel developed its own budget crisis due to problems in its foundry business—it announced 15,000 job cuts across the company earlier this month, as part of a drive to save $10 billion by 2025. Saxony-Anhalt’s government was reported in February to be expecting the Commission’s approval of the scheme within “a few months,” but it’s August now and that approval is yet to appear.
There are enough concerns about the future of Intel’s Magdeburg plan that Saxony-Anhalt’s government has developed a Plan B for the land Intel is set to use for its big development, Germany’s Der Spiegel reported Friday. But the state government responded to that report by insisting that it had no doubts about the Intel project going ahead. And, when announcing Intel’s cost-saving measures this month, CEO Pat Gelsinger insisted that the troubled chip giant would continue to expand its European manufacturing capacity.
There does now seem to be considerable momentum behind the EU’s chipmaking ambitions—the Commission’s delayed Intel decision could either maintain or break it. More news below.
David Meyer
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NEWSWORTHY
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Trump’s Swiftie fakes. Former U.S. President and current presidential candidate Donald Trump has shared AI-generated images that falsely suggest he has the support of Taylor Swift and her passionate fans, known as Swifties. As The Verge notes, Trump’s posts probably fall short of violating election deepfake laws, but Swift could have grounds to sue if she wished. The superstar hasn’t endorsed anyone in this race yet, though she did come out for the Biden/Harris ticket in 2020.
Tesla’s EU tariff. The European Union is pressing ahead with its plan to slap extra tariffs on the import of Chinese-made electric vehicles, including Tesla’s—but Elon Musk’s company will get off relatively lightly. As Bloomberg explains, Tesla’s tariff will be just 9% rather than the theoretical 21%, while Chinese companies that get far more support from the Chinese government will be saddled with tariffs as high as 36.3%. BYD, Tesla’s biggest competitor, is getting a 17% tariff.
ON OUR FEED
“It’s gonna be like a zero margin business because there’s so much price dumping. People are giving away the model for free. It’ll still be a big business, it’ll still be a pretty high number because people need this tech—it’s growing very quickly—but the margins, at least now, are gonna be very tight.”
—Cohere CEO Aidan Gomez spells out a big problem for AI providers such as his, which is one of the last remaining startups to be developing large language models. “There is a lot of excitement at the application layer,” he added, according to TechCrunch.
IN CASE YOU MISSED IT
Bayesian superyacht party was a celebration of Mike Lynch’s U.S. Lawsuit victory against HP when waterspout storm struck, by Bloomberg
Here’s how to find out if your Social Security number was included in last week’s massive data breach, by Chris Morris
Amazon’s delivery drones are too loud for the residents where it’s testing the program, by Paolo Confino
Musk blames the Fed for soft Tesla sales, but rate cuts won’t solve his problem, says ex-Hertz CEO, by Christiaan Hetzner
Tesla is hiring workers for $48 an hour to wear motion-capture suits to train its humanoid robots, by Sasha Rogelberg
Over a million people flock to play Black Myth: Wukong, China’s most serious attempt to make a blockbuster video game, by Bloomberg
BEFORE YOU GO
Parkinson’s implant hope. A clinical trial of a new kind of deep brain implant for the treatment of Parkinson’s disease has yielded positive results, the Financial Times reports. Deep brain stimulation (DBS) implants have been used for years as a Parkinson’s therapy, emitting regular electrical pulses to mitigate motor symptoms such as tremor and stiffness. But a new adaptive variety of DBS reads the user’s neural activity and uses AI to respond with continually adjusting stimuli. It seems this “smart pacemaker for the brain” approach could be twice as effective as standard DBS.
