Two sources stated that TSMC (2330. TW) is in advanced negotiations with the German state of Saxony to develop a new facility and is seeking government subsidies.

TSMC, the world’s largest contract chipmaker and Asia’s most valuable listed business said in 2021 that it was considering a first European unit in Germany.

During chip scarcity and supply chain delays during the COVID-19 epidemic, the EU passed the European Chips Act to streamline government financing regulations for semiconductor facilities.

TSMC and Saxony have been holding “serious and advanced” negotiations in Taiwan, according to a source.

The individual, who declined to be identified because the conversations are private, said TSMC has been exploring incentives it may acquire to develop the production in Germany due to higher labor costs.

In December, TSMC declared “no definite intention” to develop a chip facility in Germany.

Based on customer demand and government assistance, TSMC CEO C.C. Wei said the company talked to customers and partners about developing an automotive-focused European factory in January. TSMC declined to comment.

The EU is recruiting Taiwan as a “like-minded” partner to establish new chip facilities.

The second source stated the German and Saxony governments are prepared to provide subsidies but need more EU funding.

“Nobody comes without subsidies,” the individual said.

The Saxony administration said corporations would develop plants, but it always negotiated with key enterprises about investing more in the region.

The state administration said Saxony officials addressed the EU Chips Act with EU Commission President Ursula von der Leyen in Brussels on March 6.

Germany’s economic ministry said it couldn’t comment on corporate intentions, but the federal government was eager to assist and promote semiconductor production initiatives under the European Chips Act.

The European Commission remained silent.

TSMC is globalizing. Samsung is investing $40 billion to establish a semiconductor facility in Arizona and planning a second one in Japan.

Using 5-nanometre technology, the Arizona facility will begin production in 2024. Once the U.S. enacted a $53 billion semiconductors industry subsidy and tax credit program, construction began.

The first insider stated TSMC’s German facility, if built, will make less sophisticated chips, mainly for the auto industry.

“German industry needs chips like these,” the individual said.