Intel and TSMC are planning a multi-billion dollar chip manufacturing expansion in the EU

As the EU tries to boost its tiny chip production, two chip titans — neither of which have roots in Europe — have targeted the bloc. Intel has now allocated tens of billions of dollars to expand there, but TSMC has been more cautious, only discussing possible plans to build chip factories on the continent.

Intel on Tuesday outlined the size of its new investments, providing up to 80 billion — and investments in Italy, Poland and Spain.

Intel’s EU plans are another pillar in the company’s hundreds of billions of dollars in an attempt to reinvent itself after years of struggle. Under CEO Pat Gelsinger, Intel has vowed to transform itself into the world’s chipmaker, opening up its factories to build processors to be developed by anyone who pays for them. At the same time, it is committed to regaining its historic lead in chip design technology with a renewed focus on innovation.

Work on Fab 34 – Intel’s new manufacturing facility in Leixlip, Ireland – began in 2019. With production scheduled to begin in 2023, the new facility will double Intel’s available manufacturing space in Ireland.

Photo: Intel Corporation

Gelsinger’s plans go against what has become common wisdom in the chip business: either stick with the design of chips or just make them, but not both. Fabless chipmakers make more good business sense: It’s too difficult to manufacture, too expensive — a single advanced manufacturing tool costs up to $360 million, and factories cost $10 billion a piece — and it’s impossible with TSMC’s powerhouses or Samsung or something to compete argument goes.

But Intel has chosen to go its own way. It will allocate €17 billion to build two new manufacturing facilities, or fabs, in Magdeburg, Germany. As a new location, Germany makes perfect sense as it’s home to automakers and several companies like Infineon that supply chips for vehicles.

Intel said its German factories will produce chips with the company’s most advanced features, and the factories are expected to start operating in 2027. The factories will include a new hub the company is calling Silicon Junction, which will serve as a connection point for manufacturing in the region.

“This broad initiative will boost Europe’s R&D innovation and bring world-class manufacturing to the region for the benefit of our customers and partners around the world,” Gelsinger said in a statement. “We are committed to playing an integral role in shaping Europe’s digital future for decades to come.”

The Leixlip, Ireland factory will receive a €12 billion investment from Intel aimed at doubling production capacity and adding its most advanced ultraviolet lithography manufacturing process. Intel said it is negotiating with the Italian government to build a back-end manufacturing facility in Italy, referring to the final manufacturing stages of testing and packaging. France will become the company’s European home for high-performance computing and AI design as the company plans to build its R&D center around the Plateau de Saclay.

Intel’s plans mark a significant step for EU lawmakers as the bloc has said it aims to double the size of the chip industry there. Policymakers in Europe passed a chip subsidy bill – something that lawmakers in the US continue to push but have not yet signed into law – and one of the goals was to win a new factory from Samsung, Intel or TSMC. EU Commission President Ursula von der Leyen said in a Video message Tuesday that Intel’s investment was the first major achievement under the EU chip law.

A rendering shows early plans for two new Intel processor factories in Magdeburg, Germany.

Credit: Intel Corporation

Unlike Intel, TSMC was less eager to commit to a major new fab project in Europe. During the company’s recent earnings conference call, Chairman Mark Liu said the company was still evaluating a potential location.

To make it worthwhile, TSMC needs to determine whether it would meet the needs of its customers and whether it could serve them anywhere in the world, Liu said. Taiwan, where most of its factories are located, already has an ecosystem in place to support businesses, talent, and infrastructure.

But Taiwan’s government is very interested in Europe. Recently, the company announced a commitment of US$1.2 billion for technology investments in Lithuania, divided between a US$200 million investment fund and US$1 billion in loans for various projects.

For Taiwan, a large part of technology investment revolves around semiconductor manufacturing as the country has staked its economic future on its continued leadership in the industry, according to Eric Huang, head of Taiwan’s representative office in Lithuania.

“I think we’re looking at different dimensions of how to work with European countries, especially Lithuania, but also Europe that wants to develop some semiconductor manufacturing capabilities there,” Huang said in a recent interview. “So we’re going to look at opportunities.”

Lithuania may sound like a random country to make a significant investment in chips, but several companies there make specialized laser technology that Huang says is useful for dicing a specific type of silicon wafer used to make chips for electric vehicles be used.

Asked whether the war in Ukraine has changed Taiwan’s view of the security of its European investments, Huang said, “We firmly believe that NATO is a very strong international treaty organization. So if NATO is not reliable, then which organization is reliable?”