The company is taking advantage of state support for the $11 billion plant which is worth 5 billion euros. It will be TSMC's third factory outside of its traditional manufacturing bases in Taiwan and China and will be located in Dresden, Saxony.
Germany has been talking with TSMC over many years as it looks to develop the domestic semiconductor industry in order to support the country’s automotive and industrial sectors.
The move comes after the European Union approved the European Chips Act, a 43 billion euro subsidy plan that looks to double its chipmaking capacity by 2030, in a bid to catch up with Asia and the United States.
"Germany is now probably becoming the major location for semiconductor production in Europe," German Chancellor Olaf Scholz said. The announcement comes just two months after Intel unveiled a 30 billion euro plan to build two chip-making plants in the country.
Saxony is already home to several chip fabs but TSMC's investment is the single largest in Saxony's history and it will create up to 10,000 jobs both at the factory and among its suppliers.
TSMC said that it would invest up to 3.499 billion euros into a subsidiary, European Semiconductor Manufacturing Company (ESMC), of which it will own 70%.
Bosch and Infineon along with NXP will each own 10% of the plant, which will make up to 40,000 wafers a month for cars and industrial and home products when it opens in 2017.
The German Economy Minister Robert Habeck hailed the investment. "There is going to be a real ecosystem for semiconductor manufacturing in Germany. It's going to generate orders for the whole sector: for machine builders, for optics manufacturers, and for skilled workers."
