Taiwan Semiconductor Manufacturing Company (TSMC) is in talks with German authorities for up to 50% subsidies for its proposed plant in the country, reported Bloomberg, citing sources.

The negotiations between the German government, TSMC and its partners are ongoing, the sources said. A final decision is yet to be made and the final amount of government aid could still change. In addition, any subsidy will require clearance from the European Commission.

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

The talks around the construction of the Dresden plant, which could cost up to €10bn ($10.7bn) to build, highlight the increasing competition for semiconductor manufacturing capacity.

As per the report, the potential subsidies being considered would place the German government’s support for the facility on par with Japan’s offer to TSMC for building a factory there.

It would also exceed the maximum of 40% that most other chipmakers are being offered for their European units.

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Responding to the development, the German Economy Ministry said that it is in a “close exchange” with TSMC “with the aim of jointly discussing prerequisites for an investment decision.”

Without providing any more detail, the ministry said the project could be funded under the European Chips Act.

Early in April, the bloc passed the $47bn Chips Act to increase domestic production in the wake of the Covid-19 pandemic’s disruptions and amid escalating US-China tensions.

Meanwhile, a TSMC representative said that the chipmaker is weighing the possibility of building a fabrication plant in Europe and declined to comment further.