With the announcement on August 8, 2023 of TSMC's decision to set up a fab in Dresden, Germany has risen to be a leading semiconductor manufacturing hub in Europe, especially as Intel is also constructing its Magdeburg fabs dedicated to Intel 20A (2nm) and 18A (1.8nm). Notably, TSMC's Dresden fab is expected to begin volume production in 2027, around the same time when Intel's Magdeburg fab is also expected to begin volume production.
According to Silicon Saxony, an industry association representing the semiconductor cluster in the region, TSMC's decision will attract additional international companies and skilled workers. Indeed, a complete semiconductor ecosystem is taking shape in the state of Saxony. As Dirk Röhrborn, chairman of the executive committee of Silicon Saxony, points out, Saxony will also host the headquarters of the new RISC-V company jointly formed by Bosch, Infineon, NXP, Qualcomm and Nordic Semiconductor to accelerate the commercialization of RISC-V architecture.
Frank Bösenberg, managing director of Silicon Saxony, noted that the TSMC decision sets the agenda for regional development in the greater Dresden area for the next two decades, as urban planners are challenged to develop the infrastructure with the necessary speed. "Previous plans must be brought into line with the needs of the future," said the managing director, who recognized the great responsibility and the historic opportunity for the region.
Regarding whether TSMC will need to bring its own network of suppliers to Dresden, Bösenberg indicated that many suppliers are already present and qualified by local fab operators like Bosch, even though a few new suppliers from Taiwan and Asia are still expected. In this sense, cooperation with JV partners Infineon, NXP and Bosch is key for the Taiwan-based foundry house to build a network of European suppliers.
A future battleground between Intel and TSMC?
Along with AI chips, auto chips are rising to be the backbone of future semiconductor industry growth. Both TSMC and Intel Foundry Services (IFS) have been actively enhancing their competitiveness in the market. Germany, thanks to its strong automotive industry, has become a major beneficiary of this trend, especially with the European Chips Act clearing the path for subsidizing so-called "first-of-a-kind" chip manufacturing facilities, allowing Berlin to allocate EUR20 billion from its Climate and Transformation Fund to support fab construction costs. Half of it is planned to support Intel's EUR30 billion project in Magdeburg, while EUR5 billion is planned for TSMC's Dresden project that is estimated to exceed EUR10 billion.
Though the presence of Intel and TSMC undoubtedly benefit Germany's semiconductor industry, one cannot rule out the possibility that the central European country will also become a battleground between the two semiconductor giants. According to a source familiar with Intel's business in Germany, right now Intel and TSMC "won't necessarily be competing for the same markets."
"ESMC (European Semiconductor Manufacturing Co.) in Dresden won't have the advanced lithography equipment for the nodes they are targeting," said the source, "I think we're not direct competitors with the current state of things."
However, as the source noted, the market is evolving and so might the Dresden fab over time. "I look at what Tesla is reportedly ordering from TSMC for their self-driving logic chips and I wonder if down the line we might compete in the same market segment," indicated the source, "but currently we don't see a threat."
To tap into the growing auto chip market, which Intel expects to reach US$115 billion by 2030, the US chip giant has been working on its Automotive-Grade Foundry Platform, leveraging an open central compute architecture based on Intel's chiplet and advanced packaging offerings. An IFS Accelerator automotive program was also announced in 2021 to help automotive chipmakers transition to advanced process and packaging technologies. TSMC, meanwhile, has also been polishing up its automotove portfolio via its Automotive Design Enablement Platform. In May 2023, TSMC and NXP just announced their success in developing the industry's first automotive embedded MRAM (Magnetic Random Access Memory) based on the foundry's 16nm process.
As both Magdeburg and Dresden are located in the eastern part of Germany, in the states of Saxony-Anhalt and Saxony, respectively, the source also told DIGITIMES Asia that there could be increased local competition in eastern Germany in terms of construction workers and talents, though the TSMC investment is a welcomed addition to strengthen the overall ecosystem in eastern Germany. "It might benefit us in terms of sourcing locally, such as certain chemicals, and strengthening universities for the local talent pipelines," said the source.
Gaps in construction time & production capacity
Meanwhile, in light of TSMC's recent delays at its Phoenix, Arizona fab, it remains to be seen how the foundry plans to overcome the potential challenges awaiting its Dresden project. As DIGITIMES analyst Eric Chen pointed out, TSMC's investment in Dresden is similar to its Kumamoto investment in terms of process nodes (28/22nm and 16/12nm) and size (US$8.6 billion for Kumamoto). However, TSMC's planned capacity for Japan is 55,000 wafers per month (wpm), whereas in Dresden only 40,000 wpm is planned. A source at Intel also observed that compared to its Kumamoto counterpart, the Dresden site seems like it will take half a year longer to finish.
According to official TSMC announcements, construction of the Kumamoto-based Japan Advanced Semiconductor Manufacturing (JASM) began in 2022 and volume production is expected by the end of 2024. In comparison, construction of ESMC is set to begin in the second half of 2024 with production targeted to begin by the end of 2027.
