Taiwan and the European Union plan to strengthen economic and diplomatic relationships in a bid to deepen collaboration in making the semiconductors supply chain more resilient than it is today, reports Nikkei. TSMC is currently assessing a potential fab in Europe, but no final decision has been made. Upgraded diplomatic affairs will have an effect on economic relationships and could have an effect on TSMC's plan to build a fab in the EU.
The European Union is the largest source of foreign investments in Taiwan. Due to increased geopolitical tensions and ongoing global chip shortages, the EU wants to upgrade diplomatic relationships to ministerial and director-general levels. As a result, the EU's trade chief Valdis Dombrovskis and Taiwan's economy minister Wang Mei-hua will held official talks for the first time late on Thursday, reports Reuters.
The upgraded level of diplomatic relationships will make it easier for the EU and Taiwan to collaborate on political and economic levels. Ultimately, it will get easier for the bloc to provide incentives and/or co-fund new fabs in Europe built by companies like Taiwan Semiconductor Manufacturing Co. under the European Chips Act.
European companies do not develop loads of chips, but chips designed by Bosch, Ericsson, Infineon Technologies, Nokia, NXP Semiconductors, and ST Microelectronics are used by automotive, IT, and telecom industries, which are crucial for the European economy and security. Unfortunately, there are not many European chipmakers (GlobalFoundries, Infineon, NXP and STMicro are the biggest) and neither of them have advanced manufacturing technologies, which is why European companies that need advanced nodes (sub-14/16nm) have to outsource production to TSMC or Samsung Foundry.
But outsourcing to Taiwan and South Korea means long freight times and some other challenges for chip companies and their clients, which is why they want chip production somewhere in Europe. Having seen difficulties caused by the pandemic, European politicians are eager to build advanced chip fabs in Europe. Authorities in Germany plan to provide Intel a $5.5 billion state aid package for its fab near Magdeburg.
European politicians do not want Intel to be the only company that makes chips using advanced and leading-edge technologies, which is why they need to lure in TSMC and/or Samsung Foundry.
Meanwhile, fabs alone are not enough to create a local vertically integrated semiconductor production supply chain. Chip test and assembly facilities are also needed and there are loads of such companies in Taiwan. If the EU wants to build a local chip industry, deals with Taiwan, despite the geopolitical issues, are certainly a way to start.