EU approves €5b aid for new microchip plant in Dresden

The European Commission on Tuesday approved, under EU State aid rules, a €5 billion ($5.5 billion) German measure to support the construction of a new microchip plant in Dresden by the European Semiconductor Manufacturing Company (ESMC).

Led by Taiwan’s TSMC, the project marks the largest state subsidy under the EU Chips Act and Germany’s first.

EU Commission President Ursula von der Leyen hailed the project as a “win-win situation,” while German Economy Minister Robert Habeck committed to maintaining the project’s fast pace, targeting production by 2027.

ESMC, a joint venture involving TSMC, Bosch, Infineon, and NXP, will build the €10 billion facility. The plant will operate as an open foundry, allowing various customers to place chip orders.

Although the plant will produce slightly older chip generations, it will significantly enhance Europe’s capacity for automotive and industrial applications, bolstering resilience against future chip shortages like those experienced during the COVID pandemic.