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EU approves 5 billion euros in aid for 10 billion euro

project

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Plant will bring chipmaking giant TSMC to Europe for first

time

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ESMC expected to supply chips for cars, industry

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Intel ( INTC ) still awaits approval for advanced Germany plant

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(Recasts paragraphs 1-3, new in paragraphs 7-8 and 11-18)

By Hakan Ersen and Toby Sterling

DRESDEN/BRUSSELS, Aug 20 (Reuters) - Taiwan's TSMC

on Tuesday launched a major new computer chip plant in

Dresden, Germany, expected to be a key supplier to European

industry and carmakers after the EU Commission approved 5

billion euros ($5.5 billion) worth of state aid.

The large aid award for the project, which will cost 10

billion in all, is the biggest approved so far under the EU

Chips Act, and the first in Germany.

It is also the first project in Europe under TSMC, the

world's largest contract chipmaker, and is expected to improve

Europe's resiliency if a chip shortage of the type experienced

during the COVID pandemic happens again.

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

Commission President Ursula von der Leyen said at a ceremony in

Dresden, the heart of Germany's "Silicon Saxony" chipmaking

region.

German Chancellor Olaf Scholz said ensuring access to

semiconductors is a "central issue" for Germany, while Economy

Minister Robert Habeck said his government, which has struggled

with budget problems, would do all it can to ensure the project

enters production on time in 2027 as planned.

TSMC formed a joint venture called the European

Semiconductor Manufacturing Company (ESMC) to build the plant,

with European firms Robert Bosch, Infineon and NXP

each taking a 10% stake.

CEO C.C. Wei said the plant would help bring TSMC "close to

its customers" in Europe.

Conditions for aid approval included that ESMC guarantee

access for smaller companies and universities.

"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.

Although the 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.

TSMC says the plant will be an important source of the MCUs

or microcontroller units used throughout cars in windows, brakes

and sensors.

Bosch, NXP and Infineon have all said they will also use the

plant at least in part to make various types of automotive

chips.

Following the pandemic shortages, TSMC is also building

subsidized projects in the United States and Japan to ensure

regional supplies.

Approval for state aid under Europe's 43 billion euro Chips

Act has been slow in coming, with only STMicroelectronics

projects in France and Italy previously winning

grants.

The largest European chips project still seeking approval is

a 30 billion euro plant planned by Intel ( INTC ) in Magdeburg,

Germany that won't break ground this year as initially planned.

Completion of the Intel ( INTC ) plant, which would be Europe's only

plant making the most advanced computer chips, is expected 4-5

years after EU approval.

An Intel ( INTC ) spokesperson said the company is "working closely

with our EU government partners ... (to) execute on our plans."

($1 = 0.9024 euros)