Germany ties itself to Taiwan on chips. It comes with risks.

German and European Union leaders flanked by Taiwanese business tycoons broke ground on a multibillion-euro microchips factory in the eastern German city of Dresden on Tuesday — a major moment for Europe to strengthen ties with the Asian island on critical technology.
The challenge? To prevent the plant from spoiling Germany’s delicate relationship with China.
Taiwan’s tech leader TSMC — the world’s largest chipmaker — is the main partner behind the €10 billion project in Dresden, a venture that’s expected to advance the EU’s goal of having more microchips made in Europe. Germany’s precious car industry will benefit from the chips rolling off the production line.
German Chancellor Olaf Scholz attended the opening on Tuesday, joined by European Commission President Ursula von der Leyen who told the audience the Dresden plant is “an endorsement for Europe as global innovation powerhouse.”
But the German-Taiwanese partnership in producing critical technology could easily trigger concerns from China, Germany’s largest trade partner, observers warned.
China considers Taiwan a breakaway province and often chides other countries for strengthening diplomatic ties with Taipei. Beijing has also been at odds with the United States, the Netherlands and other Western allies over its access to microchip technology.
Germany, on the other hand, has been walking a tightrope in its diplomacy with China in past years, fearful of seeing its trade interests suffer from geopolitical tension. Officials have been on high alert not to poke the Chinese bear by cozying up to Taiwan.
“Germany has really done its utmost to keep this Dresden investment as business-like, [as] non-political as it can,” said Mathieu Duchâtel, Director of International Studies at the Institut Montaigne think tank.
Antonia Hmaidi, senior analyst at the German China-focused think tank Merics, said the German government was “quite successful” in pitching the TSMC investment as an economic one — and less so a political one. German officials kept to “messaging discipline,” she said.
TSMC expects its German factory to provide about 2,000 high-tech jobs. It joined forces with local chips companies: the plant is a joint venture, with TSMC holding 70 percent and three European partners, Germany’s Infineon and Bosch and Dutch NXP, the remaining 30 percent. The project got €5 billion in German subsidies, which was approved at the EU level, von der Leyen said Tuesday.
Geopolitics was never far away in the lead-up to the investment, with German and Saxon ministers paying highly publicized visits to Taiwan.
In March last year, German Education Minister Bettina Stark-Watzinger visited Taiwan, the first such ministerial visit in a quarter of a century.
The state of Saxony rapidly ramped up its ties with Taiwan, especially in areas underpinning TSMC’s plans for Dresden. During a September visit last year, Saxony’s Science Minister Sebastian Gemkow opened a science liaison office in Taiwan.
Geopolitical issues need to be approached “with a high degree of sensibility and understanding,” Gemkow said in a statement shared with POLITICO.
The state of Saxony, Dresden University of Technology and TSMC also established a new student exchange program. Around 30 students from universities in Saxony left early this year for Taiwan to study for six months in the country, including a two-month internship at TSMC.
“One of the bottlenecks of developing semiconductor [factories] and production lines is the lack of talent,” Josef Goldberger, who leads Saxony’s Science Liaison Office, told POLITICO.
The German-Taiwan collaboration on skills and education is relatively low-profile, but Gemkow sees room for more in the areas including culture, tourism, language training and wider “economic” ties, he said — without specifying in the time frame in which that would be possible.
The investment and the collaborations surrounding it can always lead to increased tensions, Duchâtel warned. “The Taiwanese want this to be as political as possible,” while the Germans will try to “avoid a misunderstanding,” he said.
Stuart Lau, Aude van den Hove and Hans von der Burchard contributed reporting.