Amid the changes in the global semiconductor industry, GlobalFoundries announced on June 6, 2025 that it will invest an additional 1.1 billion euros (about 9 billion yuan) in its wafer fab in Dresden, Germany, in the next few years. This strategic move not only aroused the industry's attention to its intention to expand production capacity, but also provoked an in-depth discussion on the evolution of the European automotive chip supply pattern.
1. Automotive chips: a "mature process" on the golden sector
The automotive chip market is in a period of rapid growth. According to IC Insights, the global automotive semiconductor market size will be about $51.5 billion in 2022 and is expected to increase to $82 billion in 2027, with an average annual compound growth rate of 8.5%. Especially driven by the rapid penetration of smart electric vehicles, the use of single-vehicle chips has risen sharply - about 300~500 traditional fuel vehicles, while as many as 2,000 smart electric vehicles, and some high-end models even exceed 3,000.
GF's increase in the Dresden fab this time is clearly betting on this trend. One of its core competencies is its mature process technology with low power consumption and high reliability such as 22FDX (22nm FD-SOI), which is suitable for key application scenarios such as engine control units (ECUs), in-vehicle infotainment systems, and advanced driver assistance systems (ADAS).
Compared with TSMC and Samsung, which focus on advanced manufacturing processes, GF adopts a "differentiated breakthrough" strategy, focusing on special processes and vertical fields such as automotive and industrial. According to the data, by the end of 2024, GF's revenue from automotive and industrial applications accounted for more than 30%, ranking among the top three in the global automotive chip foundry market.
However, the market is becoming increasingly competitive. TSMC's automotive business revenue in 2024 will increase by more than 30% year-on-year, and it will continue to expand its 28nm production capacity; Samsung has also strengthened cooperation with global car manufacturers and deployed automotive-grade chip foundry. If GF is to stay ahead of the marathon, it must continue to optimize process yields, lead times, and customer support capabilities to meet the high demands for stability and reliability of automotive chips.
Figure: GF is ramping up investment in its fab in Dresden, Germany
2. The European semiconductor renaissance: a key piece of the strategic puzzle?
GF's expansion in Dresden comes at a critical stage in Europe's efforts to strengthen its semiconductor capabilities. According to the goal of the European Union's "Chips Act", by 2030, European chip production capacity will account for 20% of the global share, while currently only about 10%. Especially in core industrial fields such as automobile manufacturing, Europe faces a serious risk of "core shortage" dependence.
As one of the largest foundries in Europe, GF's Dresden plant is expected to increase its annual production capacity by 30%~50% if all the investments are implemented. This is undoubtedly a supply chain "reassurance" for local car companies such as BMW, Volkswagen, and Mercedes-Benz.
The German government also attaches great importance to the project. According to Handelsblatt, the government has approved the start-up plan for non-funded projects and has given a positive assessment in terms of financial subsidies. Saxony Secretary of State Oliver Schenk revealed that the project subsidy could reach hundreds of millions of euros and is expected to be officially distributed by 2025. This will significantly alleviate GF's capital pressure on equipment investment and technology upgrades.
However, there are still shortcomings in the European semiconductor ecosystem. Although manufacturing is expected to be strengthened, it is still highly dependent on suppliers such as ASML in the Netherlands for upstream equipment such as lithography machines. According to ASML's annual report, its sales to domestic customers in Europe will account for less than 15% in 2024. If the local equipment and material links cannot be enhanced synchronously, the process evolution and efficiency improvement of the Dresden production line will be restricted to a certain extent.
3. Global Supply Chain Restructuring: Stabilizer or "Price Stirror"?
From a global perspective, GF's move is not only about the layout of production capacity, but also touches on the core issue of chip supply chain security. In recent years, global automotive chips have been highly concentrated in Asia, especially in Taiwan and South Korea. According to AutoForecast Solutions data, about 60% of the world's automotive chips will be produced in Taiwan in 2023, and South Korea will account for about 25%. In the event of a geopolitical conflict or natural disaster, the risk of supply disruption soars.
GF's expansion of production capacity in Europe may increase the self-sufficiency rate of automotive chips in Europe by 15%~20%, providing a guarantee for global OEMs to build a "regional diversification" procurement system, and also helping to alleviate the anxiety of supply chain security at the policy level in the United States and Europe.
In the global mature process market, GF's layout is more strategic. Although 28nm and above processes are not cutting-edge technologies, SEMI estimates that as of 2023, mature process chips still account for more than 50% of the global wafer manufacturing market. They are widely used in power management ICs, MCUs, sensors, RF and analog mixed-signal applications.
The Dresden expansion is not only expected to enhance GF's capacity supply in the 28/40/55nm nodes, but also may compress the market space of other small and medium-sized OEMs. Once the market supply tends to be saturated, price wars are inevitable, and some companies that lack customer stickiness and technical moats may be unsustainable.
4. Conclusion: Risks and Hopes under Industrial Reshaping
GF's €1.1 billion investment plan is an important "chess piece" in Europe's chip strategy. It may inject a long-term and stable source of chips into the local automotive industry, or it may break the existing competition pattern in the field of mature processes and become the fuse for the reshuffle of the industrial chain.
However, it is worth being vigilant that this growth model, driven by huge investment expansion, cannot match customer demand and market rhythm in a timely manner, and there is also a risk of overcapacity and increased asset burden. In the context of advanced manufacturing processes continuously improving manufacturing efficiency, mature process foundries can only avoid the "scale trap" by relying on differentiated processes, reliable delivery and local services.
Whether it is to stabilize the strategic security of European semiconductors or to impact the global mature process pattern, GF's Dresden project is not just a simple factory expansion, but a game related to the reconstruction of the global semiconductor landscape. It is becoming clear who will benefit and who will be squeezed out. And the answer may be revealed in the near future.
