Taiwan Semiconductor Manufacturing Company (TSMC) is in talks with partners to build a semiconductor fabrication facility in Saxony, Germany with up to $11bn investment, reported Bloomberg, citing sources.

TSMC’s partners in the project include NXP Semiconductors, Robert Bosch and Infineon Technologies.

According to the sources, the project would cost at least $7.75bn, with the total investment likely closer to $11bn, and would involve government subsidies.

The plan is still in the works and could still change, they added.

Nina Kao, a TSMC representative, said the chip maker is still weighing the possibility of setting up a plant in Europe.

Kao did not provide any other detail.

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In 2021, TSMC chairman Mark Liu informed shareholders that the company had begun evaluating the possibility of establishing a manufacturing facility in Germany

According to TSMC CEO CC Wei, the proposed plant in Europe would specialise in producing chips for the automotive industry.

In Germany, comparable initiatives have received subsidies for up to 40% of their funding, as the European Union (EU) aims to increase its portion of worldwide chip production to twice its current level by 2030.

Last month, the bloc passed a $47bn Chips Act to boost domestic production following the disruptions caused by the Covid-19 pandemic and as tensions between the US and China rise.

The sources said that the group is in talks with officials over the size of the subsidy, which will require approval from the European Commission.

According to some of the individuals, the facility, which TSMC may approve as soon as August, will focus on developing 28-nanometre chips.

TSMC produces most of its semiconductors in Taiwan.

However, due to rising concerns over geopolitical tensions and China’s military threats against the island, the company has started to expand its capacity in the US and Japan.