TSMC’s plans to build a first chip factory in Europe are becoming more and more concrete. But building the factory comes with a hefty price tag.

In March, a delegation from TSMC traveled to Germany to select a location for the chip factory. It is expected to come in the state of Saxony near the city of Dresden. TSMC will not build this factory alone, but will join forces with Dutch NXP Semiconductor, as well as Infineon and Bosch as local partners.

Building a factory from scratch is a significant investment. According to Bloomberg, the quadrumvirate would have saved a piggy bank of seven billion euros. They won’t be able to avoid it, because the estimated cost of the factory would be at least ten billion euros.

Discussions are ongoing with the federal government about grants for financing. If the extra euros needed are nowhere to be found, the project could still be shelved, Bloomberg’s well-placed sources report. Company spokespersons do not want to comment further at this time.

Limited love for Europe

The arrival of TSMC in Germany is an important step in the framework of the European chip law. Europe wants to bring 20 percent of global chip production into its own country and needs the big players for this. TSMC would of course like to play this card to get more subsidies, but Europe itself is struggling with a limited budget to make the plan a reality.

Also, the love that TSMC wants to give Europe seems to be limited. The German factory would be used primarily to make 28nm chips. These are significantly less advanced than the 3nm and 4nm wafers that the chipmaker rolls off the assembly line at its Taiwanese factory.

Intel can join TSMC in Germany, although the American chip giant will be based in Magdeburg, 228 km away. But Intel’s construction plans are also being delayed because the company is trying to get more subsidies. Europe will need to build a bigger piggy bank if it wants to make the ambitious goals of the chip law realistic.