• Asia’s chip manufacturers find Germany a fertile ground.
• Local government and EU Chip Act aid global presence.
• TSMC entrenches in Saxony.

Germany is known across the world as a centre of engineering and manufacturing excellence. From heavy industry to car manufacture, its reputation is for resilient, high-quality products that are the standard against which many brands measure themselves.

Since the semiconductor supply chain crisis of the post-COVID period, investment in high-tech silicon foundries has grown, especially in the Saxony region, known locally as “Silicon Saxony”

Chip manufacturers beat supply chain shortage threat

The worldwide chip shortage, created by high demand for new hardware and exacerbated by US-China relations, was a wake-up call to governments around the world who felt themselves as hostages to the dominance of the Far East in the silicon fabrication sector. Without domestic chip manufacturers, foundries and, therefore, some guarantee of continued availability of microprocessors, industries of all types could easily find themselves in the same situation as that which transpired between 2020-2023. Several high-profile cases dominated the news headlines in the aftermath of the COVID pandemic when for example, cars could not leave German manufacturing plants for want of a few slivers of silicon for their in-vehicle entertainment and engine management systems.

Germany’s Saxony region, already home to over 3650 high-tech companies that employ over 75,000 workers (expected to rise to 100,000 by 2030), has deepened its ties with Taiwan’s TSMC and welcomed a 50bn Euro in industry investments. Frank Bösenberg, Managing Director of local trade organisation Silicon Saxony, said, “What sets us apart is not just semiconductor production but our ability to combine hardware, software, and connectivity technologies. We’ve cultivated a complete value chain, from R&D to production, supported by top-tier universities and a semiconductor-savvy regulatory environment.”

Chip manufacturer TSMC builds education ties

Ground was broken last month in Dresden, Saxony’s regional capital, on a new fabrication facility being built by the European Semiconductor Manufacturing Company (ESMC), a joint venture between TSMC, Bosch, Infineon and NXP, with additional investment in the form of subsidies by the German government. The plant, owned by TSMC, will come into production in 2027 and provide around 6,000 jobs.

Despite Germany’s advanced abilities in high-tech engineering that are largely unrivalled in Europe, TSMC still struggles to source suitably skilled employees. A range of cooperative projects between the private sector and international universities hopes to supply the demand for future generations in the form of traineeships and internships.

In addition to semiconductors, the Saxony region also boasts companies and startups in developing technologies such as organic computing and battery technology, the latter feeding into the area’s other specialisation, of EV production. But it’s in semiconductors that the realities of global competition will become most apparent. Questions about Germany’s highly unionised workforce competing with Asian work practices mean that companies like TSMC have to embrace local work cultures to expand into a truly global supplier, one that’s less at the mercy of supply chain problems.

That’s an aim in line with the EU’s Chips Act which came into force in 2023, comprising measures to increase the bloc’s share of the global semiconductor production market to 20% by 2030, from its current 10% slice at present. If achieving that goal is only possible by encouraging APAC businesses to locate in Saxony, then companies like Taiwan’s TSMC will find conditions constructed to be favourable.

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