As the continent seeks to bring supply chains closer to home, Taiwanese chipmaker TSMC committed 3.5 billion euros ($3.8 billion) to a factory in Germany, its first in Europe.

As TSMC’s third manufacturing plant outside Taiwan and China, the plant will be central to Berlin’s efforts to foster the domestic semiconductor industry its car industry needs to remain competitive abroad.

After shortages and high prices caused havoc for carmakers and machine builders during the COVID-19 pandemic, the European Union has approved the European Chips Act, a 43 billion euro subsidy plan to double its chipmaking capacity by 2030, in an effort to catch up with Asia and the United States.

Saxony, the capital of the eastern state of Saxony, has been courting the world’s largest contract chipmaker since 2021. Germany will contribute up to 5 billion euros to the factory in Dresden, German officials said.

According to German Chancellor Olaf Scholz, Germany is now probably the major location for semiconductor manufacturing in Europe, less than two months after Intel announced plans to build two chip plants there worth 30 billion euros.

In addition to the resilience of production structures around the world, that is also important for the future viability of the European continent, and it is of course particularly important for Germany.

The former East German electronics industry center Saxony already has several chip factories and is renowned for its precision craftsmanship: Taiwan Semiconductor Manufacturing Co (TSMC) officials visited Dresden’s Green Vault museum during one of the 40 rounds of talks to see exquisitely crafted jewelry.

In preparation for next year’s regional elections, conservative state premier Michael Kretschmer faces a strong challenge from the anti-immigration, far-right Alternative for Germany party. TSMC’s investment is the single largest in Saxony’s history.

“Germany must become an immigrant country,” Kretschmer said at a news conference, admitting that filling the 10,000 jobs created by the factory and its suppliers would go beyond the investment in training he was planning.

TSMC plans to invest up to 3.499 billion euros into its 70%-owned subsidiary, European Semiconductor Manufacturing Company (ESMC).

Upon its opening in 2017, Bosch, Infineon, and NXP will each own 10% of the plant, which will produce about 40,000 wafers a month for cars, industrial products, and homes.

A total of 10 billion euros will be spent on the factory.

Wolfspeed, too, has already taken advantage of the subsidies to set up shop in Germany in order to double its semiconductor market share to 20% by 2030.

German Economy Minister Robert Habeck hailed the investment as a vote of confidence in a German economy that has been battered by high energy prices following Russia’s invasion of Ukraine, triggering a slowdown and fears that Europe’s economic powerhouse could be deindustrialising.

According to him, Germany will have a real semiconductor manufacturing ecosystem. The project will generate orders for the entire industry: for machine builders, for optics manufacturers, for skilled laborers.”

As part of Washington’s plan for more chip production at home, TSMC is also investing $40 billion in a new Arizona plant, and is partnering with Sony on a plant in Japan.

According to a statement released after a board meeting that approved the German investment, TSMC also approved a $4.5 billion capital injection for the Arizona plant.