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What will TSMS do in Italy on microchips?

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TSMS, the Taiwanese microchip giant, could open a semiconductor factory in Italy or Germany. Here is the context, the details, the disputes over public subsidies and the perplexities of companies on the European market

TSMS, the leading Taiwanese microchip manufacturer, could build a semiconductor factory in Europe, Germany or perhaps Italy. As reported The Corriere della Serain fact, representatives of the Taiwanese authorities have recently initiated preliminary contacts with the Italian government regarding the opening of the plant in our country. TSMC had discussed the same thing with the German government last December.

THE CONTEXT, IN BRIEF

Microchips, or semiconductors, are components (even very sophisticated ones) needed to make cars, computers, appliances, smartphones and similar technological devices, among other things. They are therefore crucial for the future development and competitiveness of economies.

As recalled by a recent brief from Cassa Depositi e Prestiti, the United States has a 65 percent share in the design market (design) of microchips. However, as regards their concrete realization, that is the manufacturing phase, they are behind: their capacity is worth around 10 per cent; the Taiwanese one, for comparison, is over 60 per cent. Taiwan is also a leader in the final segment of the microchip supply chain, the testing and packaging phase (packaging).

America, the European Union, China and many of the other major world economies are working to “bring home” the manufacturing of microchips, that is, to install factories (“foundries”, in technical jargon) directly on their territory or in immediate vicinity, in order to guarantee the certainty of supplies.

WHAT TSMC DOES

TSMC is the largest manufacturer of contract chips: it means that it manufactures them on behalf of third parties, that is, companies that only design them but do not actually make them. TSMC’s production sites are mainly located in Taiwan, but the company – to respond to the global context of “shortening” supply chains – is also opening plants abroad: for example, it is building a $ 12 billion factory in Arizona, in the United States, and is planning a 7 billion one in Japan.

Regarding the European Union, the Taiwanese government declared a few months ago that there was a “huge” space for the Taipei-Brussels collaboration on microchips. Europe currently accounts for less than 10 percent of global semiconductor production; the European Commission’s goal is to bring that share to 20 per cent by 2030 and, to do so, it has developed a stimulus plan for the sector that is still somewhat vague (the European Chips Act). The United States wants to expand domestic chip manufacturing with a public investment of $ 52 billion.

No European state – and not even the United States – has formal diplomatic relations with Taiwan, which China does not consider a country in itself but a province of its own territory to be brought under its control.

EUROPEAN DIFFICULTIES ON TSMC

At the end of 2021 Lora Ho, TSMC’s vice president of sales in Europe and Asia, said that the company’s final decision on investing in the European continent will depend on various factors. There are three main ones: the subsidies offered by governments, the levels of demand and the availability of “talents”, that is, workers with the necessary skills.

In Europe, the demand for semiconductors comes mainly from car manufacturers, which do not need very advanced chips, that is, those that guarantee the greatest profits to manufacturers. Companies such as TSMC or Intel, therefore, have some doubts about the absorption capacity of the European market: to re-enter the large investments necessary for the construction of factories (in the order of tens of billions of dollars), they must be sure that these will work at full capacity, generating sufficient income to cover expenses.

THE QUESTION OF SUBSIDIES

Last November, former German Chancellor Angela Merkel said that “the production of competitive chips, 3 or 2 nanometers in size, for example, is essentially impossible without state subsidies.”

The idea does not appeal very much to the Netherlands, historically bearers of a liberal line in economics, who think that the idea of ​​the European Union to detach itself from the global semiconductor supply chain to focus on self-sufficiency is “an illusion”. “European interests”, a Dutch government document read, “are best served by an open ecosystem that remains focused on attracting investments, accelerating innovation and adding value to the market”.

Italy is positioned a bit halfway between the two extremes: the Minister of Economic Development Giancarlo Giorgetti declared in fact that a “reflection on the compatibility between technological sovereignty and state aid” is necessary.

TSMC IN ITALIA?

On the Courier of the Evening Federico Fubini writes that the hypothetical TSMC factory in Italy could arise between Lombardy and Veneto. The reasons include those cited by Lora Ho: the guarantee of demand, coming from the manufacturing sector; the presence of universities with which to start training projects; the availability of skilled labor “at a lower cost than Germany” and “a lower density of competition” in the chip industry.

TSMC’s investment would amount to approximately 10 billion dollars and would allow the creation of three thousand to five thousand direct jobs. However, it seems that the company wants to obtain from the government (Italian or German) a participation in the investment equal to perhaps 50 per cent. It is not clear whether EU rules allow this: subsidies are only allowed in the case of advanced chip factories, which however do not seem to be the most suitable for the European market, given the industrial context.

THE INTEL DEAL

Italy has reached an agreement in principle with the American microchip company Intel for the opening of a semiconductor testing and packaging plant. The factory could be built either in the Mirafiori area of ​​Turin (historic district of FIAT and today of the car manufacturer Stellantis) or in Catania, where STMicroelectronics already operates.

The plant of packaging Italian is part of Intel’s largest investment plan for Europe: a factory will also be built for the production of microchips, probably in Germany. On this point, the CEO of Intel, Pat Gelsinger, had explained that the company does not want to concentrate all its activities in a single European state, but rather wants to create an integrated system on the continent.

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