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TSMC's New Fab in Germany
The rumors have long been cooking. Reuters said that it took 40 rounds of talks. But now the news is finally here: TSMC is building a fab in Europe.
I was asked by a fan in Germany to give a few thoughts on the news. I love my German viewers so let's do it!
But first …
The AI and Semiconductor Symposium in Taipei
Are you going to SEMICON 2023 in September? If you are coming to Taipei, then you should come to the AI and Semiconductor Symposium that me, Dylan Patel of SemiAnalysis and Doug O’Laughlin of Fabricated Knowledge are hosting.
The three of us will give talks about AI, the semiconductor industry, and semiconductor history. And Dylan tells me that there’s going to be a secret special guest. I have no idea who it is, right now. He is keeping it secret.
There are a few things about the structure of TSMC Dresden - ESMC as they will call it - which are interesting to me.
ESMC is a joint venture between TSMC and three European electronics companies - Robert Bosch, Infineon, and NXP. TSMC will own 70% and the three European companies will each own a 10% slice.
TSMC will operate the fab, which will produce two nodes - a 28/22 nanometer planar node and a 16/12 nanometer FinFET node.
The "planar" and "FinFET" parts of the node's name is a reference to the type of transistor gates that the nodes will produce. FinFET nodes stick up over the silicon landscape, which is why they are referred to as being 3-D.
Intel first introduced FinFETs in 2011. TSMC and Samsung first started using FinFETs. So this fab trails the leading edge by about 10 years or so. By the time construction is estimated to be complete in 2027, it will be even older than that - 14 years old.
The German government will provide about $5 billion of the estimated $11 billion needed to build the plant. TSMC's press release did not mention how much that they are putting in, but Reuters said it was about $3.8 billion USD.
So all in all, TSMC only needs to spend $3.8 billion to obtain majority control of a $11 billion fab. Of course, I say "only" as in $3.8 billion is nothing, which it isn't. And they still have to run it.
The European Commission needs to approve the deal. There are a lot of subsidies in it, which makes me wonder if it will be a problem. But considering how big of a deal the EU thinks chips are, it should go through fine.
The first thought that came to mind was that this looks more like the TSMC fab out in Japan's Kumamoto Prefecture than TSMC Arizona.
TSMC Arizona is fully owned and run by TSMC. Meanwhile, that Kumamoto fab - Japan Advanced Semiconductor Manufacture or JASM - is a joint venture with a collective of Japanese companies like Sony and DENSO.
Sony makes image sensors and DENSO makes automotive chips. Both of these companies already own semiconductor fabs in the country. Sony's big image sensor plant is right next door to JASM.
The construction of the Kumamoto Fab looks like it has been going about pretty smoothly. There hasn't been much reporting on it. Some domestic companies in the area have been complaining about the effect of TSMC's hiring push. But overall, no news. And no news is good news.
TSMC has done a few equity partnerships prior to the Kumamoto and Dresden deals. Most notably is their joint venture in Singapore, SSMC.
In general, they prefer having full equity control of their big factories. So I wonder if TSMC sees having these foreign partners as being beneficial in getting the lay of its new land. Having a local partner to smooth out disturbances would have been super helpful.
I had thought that the effort would involve more of Europe's semiconductor companies.
Europe's largest semiconductor makers are STMicroelectronics, NXP, and Infineon. NXP is a Dutch company - descended from Philips' semiconductor division. And Infineon is German - descended from Siemens semiconductor division.
I had expected all three of these big European companies to be involved in the deal. TSMC might present a threat to them, after all. But currently, TSMC's partners are Bosch, NXP, and Infineon. Where is STMicroelectronics?
My thinking is that it has to do with subsidies. Bosch and Infineon are German companies. STMicroelectronics is a French-Italian fusion. France and Italy did not contribute subsidies to the deal. That's my best guess for why STMicroelectronics is not involved.
Post-send note: A helpful reader pointed me to a recent announcement by STMicroelectronics that they are partnering with GlobalFoundries for a new 300-mm fab in France. So another reason why they aren’t joining is that they already have their partnership in hand.
Same as with Japan and Arizona, TSMC chose to site their German fab in a rather crowded spot - Dresden.
Dresden already hosts fabs from GlobalFoundries, Wolfspeed, and Infineon so they are entering a bit of a crowded space here. The competition for talents and resources like power will be pretty fierce.
TSMC probably evaluated whether or not they should go their own path and build further away from Dresden. Intel is taking this approach with their German fabs in Magdeburg.
They would have to do more work especially with the infrastructure, but they would be the only game in town.
One of the big questions that I had when it came to building new fabs in Europe was demand drivers. Who will be buying these chips?
ESMC will produce about 40,000 300-millimeter wafers each month. This makes the fab larger than a megafab - 25,000 wafers - and a gigafab - 100,000 wafers.
That is a lot of wafers. Infineon and Bosch already have factories in Dresden. Infineon says that their fab there is their largest front-end site. So what products are these wafers going to go into?
I was hoping for some sort of surprise application but it seems like everyone is sticking to the obvious - automotive. TSMC's automotive revenues have been on the rise after the pandemic - presumably driven by an electrification trend.
I did find it interesting that NXP also announced that they are partnering with TSMC to develop a new type of FinFET based Magnetic RAM. NXP said that this RAM is more reliable and can update far faster than flash memory.
So I reckon that there is going to be a lot more of this R&D going on between the customers and TSMC.
For the most part, I think this Germany fab is going to go relatively smoothly. The project is less high-profile than Arizona, with various partners involved. That $30 billion Intel project is probably under more scrutiny here.
Furthermore, it is under less time and economic pressure than Arizona. It is a lagging edge node, so there isn't so much time pressure to get the thing out.
I'm looking forward to seeing the fabs! Maybe make a trip out there once it is done. I am also a big fan of Sauerkraut.