Microchip factory to forge 'even closer' EU-Taiwan ties

"Just like how Taiwan and the United States are continuing to strengthen cooperation ... TSMC going to Europe will certainly strengthen bilateral relations in the future," she added — referring to what will be Taiwan's first-ever high-tech plant in Europe.

The €10.2bn facility in Dresden, eastern Germany, will produce semiconductors — a key electronic component — for cars, domestic appliances, and industrial goods and employ 2,000 people when it starts up in 2027.

It will be co-owned by TSMC and German and Dutch firms Bosch, Infineon, and NXP, but also lubricated with a €5bn German government subsidy, according to German newspaper Handelsblatt.

"Germany is now probably becoming the major location for semiconductor production in Europe," German chancellor Olaf Scholz said on Tuesday.

"That is important for the resilience of production structures around the world, but it is also important for the future viability of our European continent, and it is of course particularly important for the future viability of Germany," he added.

The German state aid still has to be approved by the European Commission.

But EU industry commissioner Thierry Breton also said on Tuesday the TSMC factory would bring "stronger security of supply for Europe".

And the EU has launched a €43bn plan, the European Chips Act, designed to double domestic production capacity by 2030.

The initiatives come after the Covid pandemic and Russia's invasion of Ukraine disrupted global supply chains, exposing EU vulnerability to overseas chip-makers.

Ever-louder Chinese sabre-rattling on Taiwan, a major semiconductor supplier, has also alarmed the EU.

China is yet to comment directly on TSMC's new German deal.

But 10 Chinese warplanes flew into Taiwan's air-defence zone on Wednesday, one day after the German enterprise was announced, in the second incursion of its type in a week, Reuters reported.

China has also hosted several war-games next to its former province, which broke away in the 1940s, and aired pro-invasion propaganda films.

And it previously punished the EU's Lithuania with unofficial trade sanctions for building closer diplomatic and business ties with Taipei.

Meanwhile, the EU's foreign affairs chief, Josep Borrell, spoke with his Chinese counterpart Wang Yi on Monday in preparation for an EU-China summit later this year.

China and Taiwan are both angling for a bilateral investment agreement (BIA) with the EU in future.

But Lithuania aside, China's other anti-EU sanctions — targeting MEPs and EU officials who blacklisted Chinese civil servants over human-rights abuses — have stood in the way of progress.

"The EU will continue to reduce critical dependencies and vulnerabilities, including the supply chain and will de-risk and diversify where necessary," said an EU strategy paper on China adopted in June.

A German strategy paper on China from July also said: "China is seeking to create economic and technological dependencies with a view to using these to assert political objectives and interests".

"China has changed. As a result of this and China's political decisions, we need to change our approach to China," Germany added, referring to Beijing's ever-more hawkish foreign policy.