The world's most important chip manufacturer, Taiwan Semiconductor Manufacturing Co. (TSMC), is making great strides towards building a semiconductor factory in Dresden.

According to information from the FAZ, TSMC already asked customers in Germany about their interest last year.

The interest was great, they say.

Patrick Welter

Correspondent for business and politics in Japan based in Tokyo.

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Stephen Finsterbusch

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The company, which is the largest contract manufacturer of microchips for customers such as Apple and Nvidia, also confirmed talks with suppliers on Thursday.

"In Europe, together with customers and partners, we are evaluating the possibility of building a special factory focused on automotive-specific technologies," C.C. Wei, chief of TSMC, said in a conference call.

Automotive suppliers such as Bosch, Infineon or NXP, the former chip division of Philips, could be considered as European customers for such a special factory.

The car chips business is a minor item on TSMC's balance sheet, accounting for 5 percent of sales.

The company makes its money from chips for smartphones and high-performance computers.

As a result of the shortage of semiconductors and the need to catch up due to COVID-19, TSMC recorded the largest increase in 2022 in the automotive sector at 74 percent.

TSMC also on Thursday reported record year-end earnings and forecast much more muted growth for the new year.

First production facility in Europe

The factory in Dresden would be the company's first production facility in Europe.

TSMC is thus confirming its course of globally diversifying production, which has so far been concentrated in Taiwan.

The company is following the wishes of Western governments and important customers who, after the chip shortage of the Covid years and fears about Chinese striving for power over Taiwan, are relying on a more stable supply through domestic production.

TSMC produces most of its best high-performance chips for the global electronics industry in Taiwan.

In addition to two $40 billion chip factories in Arizona, where TSMC will produce for Apple, among others, the company is currently building a factory in Kumamoto, Japan, in cooperation with Sony.

Wei confirmed interest in building a second factory in Japan.

As in Japan, TSMC also requires and clarifies in Germany before making the investment decision that local customers will secure sales and that the factory will pay off with state financial aid.

TSMC delegations spoke to the Saxon state and federal governments several times in the past year in Dresden and Berlin.

A possible area is available in front of the gates of Dresden, it is said.

Start-up financing and grants are available.

Dresden is the largest semiconductor location in Europe.

8,000 people work in the chip factories of Bosch, GF, Infineon, SAW and X-Fab, and the trend is rising.

Bosch and the contract manufacturer GF want to expand their local capacities.

Infineon, which makes industrial chips, is considering building another factory in Dresden.

At 5 billion euros, the new plant could be the Munich group's largest single investment to date.

The American chip manufacturer Intel wants to build several factories near Magdeburg, 200 kilometers northwest of Dresden, for 17 billion euros.

Brussels wants to lower hurdles

Like the plans of Infineon and Intel, the possible investment by TSMC in Dresden is subject to the European Union making progress with its Chips Act.

With the new rules, Brussels wants to lower administrative hurdles for investments, speed up bureaucratic approval procedures and clear the way for high levels of state aid.

The rules are expected to come into effect in June at the earliest.

Federal Research Minister Bettina Stark-Watzinger (FDP) plans to fly to Taiwan in the spring.

It would be the highest-ranking German visit to the island republic in 25 years.

TMSC ended the past fiscal quarter and fiscal 2022 with record earnings.

Profit rose in the financial year by 70 percent to 1,026 billion New Taiwan dollars (31 billion euros).

Revenue reached 2.264 billion New Taiwan Dollars, up 42.6 percent.

For the first time in its history, TSMC overtook American competitor Intel in terms of sales in dollars.

The Covid-related production difficulties of important customers like Apple at the end of the year in China apparently did little harm to TSMC.

Gross margin reached a record 62.2 percent in the fourth quarter, a sign of good profitability.

For the New Year, Wei dampened expectations.

For the first time since the beginning of the pandemic, the company expects a drop in sales in the first quarter.

"Demand is weaker than we thought three months ago," Wei said.

The electronics industry is currently experiencing less buying interest and inventory adjustments for smartphones, computers and other devices.

A recovery is mainly not expected until the second half of the year.

TSMC sees only "mild" revenue growth this year.

The company plans to scale back its capital investments to $32 billion to $36 billion.

In extreme cases, that would be a minus of 11.6 percent.