Does Taiwan's electronic chemical supplier also go to Europe? TSMC's road to Germany is not smooth!

Source: Global TimesIn August of this year, TSMC, the world's largest chip foundry company, announced that it would establish its first chip production base in the European market in Germany. The Financial Times reported in the 11th daily that due to the lack of high-quality electronic chemicals required for semiconductor production in Europe, many Taiwanese companies that supply chemicals to TSMC are also considering investing in Europe

Source: Global Times

In August of this year, TSMC, the world's largest chip foundry company, announced that it would establish its first chip production base in the European market in Germany. The Financial Times reported in the 11th daily that due to the lack of high-quality electronic chemicals required for semiconductor production in Europe, many Taiwanese companies that supply chemicals to TSMC are also considering investing in Europe. However, the weakness of the European semiconductor industry chain has led many industry insiders to question its feasibility. Experts interviewed by the Global Times believe that Taiwanese companies face cost challenges when investing in Europe, and at the same time, the welfare support promised by European governments may be difficult to implement.

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Will Taiwanese electronic chemical suppliers also follow suit to Europe?

Taiwan's Li Changrong Chemical Company is a supplier of TSMC's detergent and solvent products. General Manager Liu Wenlong stated that European chip manufacturers have relied on mature technology from the past for many years, resulting in low efficiency in their existing manufacturing processes and shrinking supply chains. For example, the chemical supplier of Infineon Technology, a German company that collaborated with TSMC to build a factory, is still at the production capacity of decades ago. They haven't realized to what extent the most advanced chemicals can help them increase production, "Liu Wenlong said. The company is targeting the European market and is planning to invest in Germany.

Currently, Europe is a net importer of key electronic chemicals, and changing this situation to improve competitiveness is a long-term and expensive challenge that requires significant capital expenditure. "An executive at a European petrochemical company stated that almost all materials on the semiconductor value chain in Europe lack high-end supply capacity. When manufacturing chips, a large amount of sulfuric acid is required for cleaning and etching, and Europe does not have enough high-quality sulfuric acid to purchase from Asia. The supply of isopropanol material for wafer cleaning is also in short supply.

Xiang Ligang, an expert in the communication industry and chairman of the Information Consumption Alliance, told Global Times on the 11th that Taiwanese companies' desire to invest in Europe largely indicates their unease. Due to geopolitical considerations, these companies are concerned that their development in Taiwan is not safe enough and the cost of development in the United States is too high. Therefore, they hope to make a difference in Germany and Europe.

There is a significant gap in the chip supply chain in Europe

On September 21st, the European Chip Act officially took effect, with plans to increase Europe's share in the global semiconductor market from less than 10% to 20% through an investment of 43 billion euros. The Financial Times reported that global chip manufacturers are vying to use the subsidies provided by the bill to establish production capacity in Europe.

According to TSMC's investment plan, the company will invest over 10 billion euros in the eastern city of Dresden, Germany, in collaboration with Bosch, Infineon Technologies, and Dutch semiconductor company Enzip Semiconductor to build a chip factory. The construction of the factory will begin in 2024, and the chips are expected to be put into production in 2027. According to the New York Times, the semiconductors produced in Dresden are not the latest technology from TSMC, but rather older generation chips preferred by the automotive industry.

At the same time, Intel has promised to invest 30 billion euros to build two chip factories in Magdeburg, Germany; The largest semiconductor wafer foundry in the United States, Grid Chip, and European Italian French Semiconductor Company have also announced an investment of 5.7 billion euros to build a semiconductor factory in France.

However, industry experts say that Europe's supply chain cannot support such a significant increase in chip production capacity. TSMC CEO Andy Lau previously stated that the gap in the European chip industry ecosystem is "one of our biggest concerns", and he stated that the German government has pledged to help solve this problem.

Dong Yifan, a scholar at the European Institute of the Chinese Academy of Modern International Relations, told Global Times on the 11th that Europe had a glorious history in the semiconductor industry, but later gradually fell behind in competition with Asia. However, Europe currently has excellent companies such as Italian semiconductor and Infineon, while the Netherlands also has certain advantages in key industrial chains such as lithography machines. But if Europe wants to achieve its ambitious goals, it still needs to rely on conditions such as innovative soil, supporting production capacity, infrastructure, talent, etc., and not just a subsidy policy can drive it.

Talent, rent, and energy are all issues

In fact, TSMC's visit to the United States to build a factory has already faced numerous challenges. The Financial Times reported that the company faces many obstacles in construction and labor for its projects in Arizona, USA. Hong Kong's Ta Kung Pao reported that TSMC's US factory is expected to mass produce next year, but progress is currently lagging behind. When TSMC applied for US wafer fab subsidies in March this year, the White House also imposed various harsh conditions. Liu Deyin expressed the hope that the German government will not set conditions when applying for subsidies.

In fact, Germany faces many challenges in developing chips, including high energy prices and shortage of skilled workers after the Russia-Ukraine conflict. The New York Times reported that there were over 25600 job vacancies in Saxony, Germany last year, with no qualified applicants, especially in the fields of electronics, computer science, and software development. It is reported that on September 19th, TSMC announced the signing of a semiconductor talent cultivation plan with 11 universities in Germany to prepare for TSMC's investment and factory establishment in Germany. The German newspaper "Business Daily" recently revealed that Germany's financial support for TSMC will reach 5 billion euros, but the German Ministry of Economy did not respond.

On the 9th, the German newspaper "Business Daily" reported that Infineon and TSMC are investing in factories in eastern Germany and facing another problem - housing shortage. Currently, rent in Saxony has significantly increased and there are no signs of improvement.

Xiang Ligang stated that Europe does not have a large electronic manufacturing market and the demand for semiconductors is not as high. Building a semiconductor industry chain in such a place will inevitably increase costs. Tesla also wants to build a factory in Dresden, but progress has been very poor. "One environmental issue has killed the company," and TSMC may also face the same situation, with setbacks in construction costs, construction time, and operating costs.

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