Any bureaucratic red tape and labor laws had little influence on Germany’s choice of the location of TSMC’s European factory. Because for semiconductors it’s about the market, the talents and the suppliers. And France only scores one point out of three here…
Reuters’ ears seem to confirm the rumours: TSMC should choose Germany for the location of its future European factory of advanced semiconductors. According to information from the economic news agency, the experts of the Taiwanese company are in advanced talks with the government of Saxony (one of the German Länder) to negotiate support for the installation of a plant that could cost at least USD 20 billion. It must first be made clear that talks have not stopped and nothing has been signed yet. Like any market, it is subject to negotiation and the current economic and geopolitical instability poses more than ever a threat to all industrial establishments.
Read also: Thanks to TSMC, the United States will have a real state-of-the-art factory to be less dependent on Asia (December 2022)
We can nevertheless deduce that of several candidate countries for the establishment of such a factory, Germany is currently at the (clear) head of the choices of the Taiwanese. And just like last year, when Intel announced its $80 billion investment plan in Europe, we can ask ourselves the question: “Why Germany and not France”?
Is it French labor laws, our (possibly?) dirty nature, strikes or our tendency to turn the country’s (very many) roundabouts into esplanades for barbecue fights? In the midst of a “business” discussion, it is extremely difficult, even illusory for non-economic media, to obtain first-hand information from “sources familiar with the matter.” However, there are factual elements that make it possible to understand why Germany has assets that we do not. For that you have to look at Intel’s previous answers on this subject – which we were able to ask about this last year – on the one hand. But also take a good look at the ecosystem of our German neighbour. And understand what it means for semiconductor manufacturers.
The market, talents and suppliers
Artist’s impression of the future Intel factory in Magdeburg. ©Intel
As good defeatists, the French would be quick to say that “everything is going down the drain” and that our country is “in decline”. Except last year another 5.7 billion euros were invested by STMicro and Global Foundries in the future expansion of the ST factory in Crolles, near Grenoble. And while we sometimes suffer from an inferiority syndrome to the German qualitythe reality is that Mr. Scholtz’s country also faces major challenges – dependence on China (economic) and Russia (energy), higher inflation, low birth rate, Deutsche Bahn in decline, etc. On the other side of the Rhine, not everything necessarily better.
But in the world of semiconductors, Germany has several advantages.
The first is the local market. And this market is called the automobile, the area in which Germany is an industrial giant with its huge groups – Volkswagen AG, BMW Group or Mercedes-Benz Group. While many thought – wrongly – that the car would be content with cheap chips to produce, we now know that is not the case. The car of the future is packed with chips and needs computing power. ” Within ten years, the most advanced car models will have a combined computing power of their chips ranging from x7 to x10 compared to today’s best vehicles. predicts Nakul Duggal, vice president and head of Qualcomm’s automotive division, whom we met at MWC 2023 in Barcelona last February. And to meet these power needs, you need chips engraved in the latest technologies, which Qualcomm is working on with its Snapdragon Ride Flex platform.
Then there is the presence of talent. France certainly has some, as acknowledged in March 2022 by Intel Vice President Raja Koduri: “ You don’t go to a continent for the prize, but for the talents. In France, the level is very high in mathematics, physics and computer science. “, he explained. This explains the choice of the American company to create a chip design site in Saclay. But it was already Germany that had won the “jackpot” of $ 17 billion on the Magdeburg site. Many considerations were taken into account parameters, especially local skills And in semiconductors, the engineers and technicians associated with this industry – which is part physical and part chemical – are more important than in France, especially on the Dresden side with the Global Foundries factories and Bosch A pole that Intel relies on, Magdeburg is only 230km from Dresden.
Which brings us to the last point, entangled in this second: the network of suppliers. This concentration of players already present, the announced consolidation with the arrival of Intel not far away, are all arguments for a new establishment. A density that France cannot boast of, with Crolles being the only top location in the area.
The discussions that are still going on, the explosion of prices on the negotiating table
Artist’s impression of a TSMC factory. © TSMC
Setting up a semiconductor factory is no easy feat. And that is even less the case today than yesterday. Yesterday it was priced at $12-18 billion due to its move to advanced technology using ASML’s extreme ultraviolet (EUV) machines. Machines of 180 million euros each that already weighed heavily on the scales. Since Intel’s latest announcements last year, location prices have skyrocketed. The costs of new projects, of course… But also those of current projects: the foundation stone of Magdeburg has not yet been laid and inflation has already shattered the projected budgets. And Intel is also negotiating an additional envelope from the German authorities, as the original price of 17 billion euros would rise to 30 billion euros. Intel is therefore asking to increase the aid envelope from 6.8 billion euros to 11.8 billion euros. And this envelope for installation assistance is, as Reuters reports, one of the main topics of conversation between TSMC and German authorities.
This does not detract from the “loss” of a large industrial site for France. A France that has the necessary sales market with a thriving arms industry and strong car industry. But neither has enough available talent or a strong enough ecosystem to win the biggest contracts.
Source :
Reuters
Reuters’ ears seem to confirm the rumours: TSMC should choose Germany for the location of its future European factory of advanced semiconductors. According to information from the economic news agency, the experts of the Taiwanese company are in advanced talks with the government of Saxony (one of the German Länder) to negotiate support for the installation of a plant that could cost at least USD 20 billion. It must first be made clear that talks have not stopped and nothing has been signed yet. Like any market, it is subject to negotiation and the current economic and geopolitical instability poses more than ever a threat to all industrial establishments.
Read also: Thanks to TSMC, the United States will have a real state-of-the-art factory to be less dependent on Asia (December 2022)
We can nevertheless deduce that of several candidate countries for the establishment of such a factory, Germany is currently at the (clear) head of the choices of the Taiwanese. And just like last year, when Intel announced its $80 billion investment plan in Europe, we can ask ourselves the question: “Why Germany and not France”?
Is it French labor laws, our (possibly?) dirty nature, strikes or our tendency to turn the country’s (very many) roundabouts into esplanades for barbecue fights? In the midst of a “business” discussion, it is extremely difficult, even illusory for non-economic media, to obtain first-hand information from “sources familiar with the matter.” However, there are factual elements that make it possible to understand why Germany has assets that we do not. For that you have to look at Intel’s previous answers on this subject – which we were able to ask about this last year – on the one hand. But also take a good look at the ecosystem of our German neighbour. And understand what it means for semiconductor manufacturers.
The market, talents and suppliers
Artist’s impression of the future Intel factory in Magdeburg. ©Intel
As good defeatists, the French would be quick to say that “everything is going down the drain” and that our country is “in decline”. Except last year another 5.7 billion euros were invested by STMicro and Global Foundries in the future expansion of the ST factory in Crolles, near Grenoble. And while we sometimes suffer from an inferiority syndrome to the German qualitythe reality is that Mr. Scholtz’s country also faces major challenges – dependence on China (economic) and Russia (energy), higher inflation, low birth rate, Deutsche Bahn in decline, etc. On the other side of the Rhine, not everything necessarily better.
But in the world of semiconductors, Germany has several advantages.
The first is the local market. And this market is called the automobile, the area in which Germany is an industrial giant with its huge groups – Volkswagen AG, BMW Group or Mercedes-Benz Group. While many thought – wrongly – that the car would be content with cheap chips to produce, we now know that is not the case. The car of the future is packed with chips and needs computing power. ” Within ten years, the most advanced car models will have a combined computing power of their chips ranging from x7 to x10 compared to today’s best vehicles. predicts Nakul Duggal, vice president and head of Qualcomm’s automotive division, whom we met at MWC 2023 in Barcelona last February. And to meet these power needs, you need chips engraved in the latest technologies, which Qualcomm is working on with its Snapdragon Ride Flex platform.
Read also: Intel: why its investments and ambitions in France are as unique as they are strategic (March 2022)
Then there is the presence of talent. France certainly has some, as acknowledged in March 2022 by Intel Vice President Raja Koduri: “ You don’t go to a continent for the prize, but for the talents. In France, the level is very high in mathematics, physics and computer science. “, he explained. This explains the choice of the American company to create a chip design site in Saclay. But it was already Germany that had won the “jackpot” of $ 17 billion on the Magdeburg site. Many considerations were taken into account parameters, especially local skills And in semiconductors, the engineers and technicians associated with this industry – which is part physical and part chemical – are more important than in France, especially on the Dresden side with the Global Foundries factories and Bosch A pole that Intel relies on, Magdeburg is only 230km from Dresden.
Which brings us to the last point, entangled in this second: the network of suppliers. This concentration of players already present, the announced consolidation with the arrival of Intel not far away, are all arguments for a new establishment. A density that France cannot boast of, with Crolles being the only top location in the area.
The discussions that are still going on, the explosion of prices on the negotiating table
Artist’s impression of a TSMC factory. © TSMC
Setting up a semiconductor factory is no easy feat. And that is even less the case today than yesterday. Yesterday it was priced at $12-18 billion due to its move to advanced technology using ASML’s extreme ultraviolet (EUV) machines. Machines of 180 million euros each that already weighed heavily on the scales. Since Intel’s latest announcements last year, location prices have skyrocketed. The costs of new projects, of course… But also those of current projects: the foundation stone of Magdeburg has not yet been laid and inflation has already shattered the projected budgets. And Intel is also negotiating an additional envelope from the German authorities, as the original price of 17 billion euros would rise to 30 billion euros. Intel is therefore asking to increase the aid envelope from 6.8 billion euros to 11.8 billion euros. And this envelope for installation assistance is, as Reuters reports, one of the main topics of conversation between TSMC and German authorities.
This does not detract from the “loss” of a large industrial site for France. A France that has the necessary sales market with a thriving arms industry and strong car industry. But neither has enough available talent or a strong enough ecosystem to win the biggest contracts.
Source :
Reuters