BRUSSELS, Aug 20 (Reuters) - The European Commission

said on Tuesday it had approved 5 billion euros ($5.5 billion)

in German state aid to support a new microchip plant in Dresden

for the European Semiconductor Manufacturing Company (ESMC).

The award for the project led by Taiwan's TSMC is

the biggest state subsidy granted so far under the EU Chips Act,

and Germany's first.

"This is a true win-win situation for all of us," EU

Commission's President Ursula von der Leyen said during the

inauguration ceremony for the plant.

German Economy Minister Robert Habeck praised the decision

and said his government would maintain the fast pace of the

project, which targets production in 2027, and finalise funding.

ESMC is a joint venture led by TSMC, the world's largest

contract chipmaker, with European chipmakers Bosch,

Infineon and NXP each taking a 10% stake.

The Dresden facility is forecast to cost 10 billion euros in

total to build.

"The facility will operate as an open foundry, meaning that

any customer - including but not limited to the three other

shareholders besides TSMC - can place orders for the production

of specific chips," the Commission said in a statement

announcing the subsidy approval.

Although the ESMC plant will be making generations of chips

slightly behind the most advanced technology used in AI chips

and smartphones, it will add capacity in the range that is most

important for automotive and other industrial applications key

to European manufacturing.

The plant should improve Europe's resiliency against a

future chip shortage of the type experienced during the COVID

pandemic.

($1 = 0.9025 euros)