NXP Semiconductors and Infineon Technologies AG will be part of a joint venture led by TSMC to construct a 28nm wafer fab in Dresden, Germany, which could cost up to €10 billion. The initiative was first reported last month and is in partnership with Robert Bosch. While TSMC has not committed to the plan yet, it could make a decision in August. The fab could receive up to 40% subsidy from the German government and European authorities, but this could be a sticking point in negotiations.

TSMC has been in negotiations with German authorities and local companies for several months over building a wafer fab that could go down to the 16nm/12nm manufacturing process node. By setting the target at 28nm, the initiative aims to address Europe's automotive chip supply security, which became a concern during the pandemic crisis, but it would not address Europe's long-term strategic security or its ability to manufacture at the leading-edge. However, restricting the project to 28nm for now would make it more affordable for Europe, and they could persuade TSMC to bring more advanced manufacturing capability to the region later.

TSMC is the world's leading foundry, and the three European companies in the partnership are fab-lite chipmakers that outsource to TSMC. The cost-sharing arrangement could make the proposed fab more likely to proceed. TSMC is pursuing a similar funding model in Japan, where it has agreed to co-invest with customers Sony and Denso in a joint venture to build a wafer fab. The Japanese government is ready to pay up to 476 billion yen (about US$3.5 billion) towards an $8.6-billion wafer fab, setting a subsidy bar of 40% that the European Union and German authorities may struggle to meet.

Intel has proposed building two wafer fabs in Magdeburg, Germany, but the plan has slowed down as Intel has sought increased levels of support from the authorities. The situation has not been helped by several quarters of poor financial results from the US chip giant. STMicroelectronics and GlobalFoundries also plan to build a wafer fab at ST's campus near Grenoble.