Sharjah 24 – AFP: Taiwanese semiconductor giant TSMC is poised to approve construction of a plant in Germany, with Berlin to provide five billion euros ($5.5 billion) in subsidies for the project, a report said Monday.

Taiwan Semiconductor Manufacturing Company (TSMC) controls more than half of the world's output of microchips, powering everything from coffee machines and smartphones to cars and missiles.

But it has been facing pressure from Western powers to build more production sites, known as foundries, overseas as tensions surge between China and Taiwan, a self-ruled democracy that Beijing claims as its territory.

On Tuesday, TSMC's board of directors is likely to back building the factory in Dresden, in the eastern state of Saxony, which would be its first in Europe, German financial daily Handelsblatt reported, citing government sources.

The government will provide the huge subsidy from a special fund earmarked for boosting semiconductor production and climate protection measures, it said.

The factory will be run in collaboration with Bosch, Infineon and NXP, and will primarily produce chips for the auto industry, the report said.

Germany's economy ministry and TSMC did not respond to requests for comment from AFP.

The company operates the world's largest silicon wafer factories, and already has plants in Taiwan, China and Japan.

A planned Arizona plant -- one of the largest foreign investments in the United States -- is currently delayed until 2025 due to a shortage of skilled workers.

The TSMC factory will be the latest semiconductor project to be unveiled in Germany recently, part of a broader European drive to boost semiconductor manufacturing.

But the German chip drive faces numerous challenges, ranging from high energy prices following Russia's invasion of Ukraine to shortages of skilled workers.