By Ben Blanchard and Friederike Heine
TAIPEI/BERLIN (Reuters) -Taiwan said on Wednesday chipmaker TSMC's 3.5 billion euro ($3.83 billion) investment in Germany would drive deeper engagement between the island and Europe, while Berlin said it was a positive sign for bilateral ties.
For Taiwan, under increasing pressure from Beijing to accept China's sovereignty claims over the island, the investment in a new factory is a show of goodwill towards Europe, even if the European Union has shown no desire to proceed with a Bilateral Investment Agreement (BIA) that Taipei has long sought.
"TSMC's investment in Europe will help bring even closer cooperation between Taiwan and the EU," Taiwan Economy Minister Wang Mei-hua told reporters in Taipei, when asked if signing a BIA would bring more Taiwanese chipmakers into the bloc.
"Just like how Taiwan and the United States are continuing to strengthen cooperation... TSMC going to Europe will certainly strengthen bilateral relations in the future," she said, referring to a recently signed trade deal with Washington.
Taiwanese officials, while noting that TSMC's investments are a company decision, have also said European countries should strengthen ties with Taiwan if they want continued semiconductor cooperation.
Germany also hailed TSMC's move as a sign of strong bilateral ties.
"This is a private decision that the federal government welcomes and supports," a government spokesperson said on Wednesday. "Economic relations are always good for bilateral relations."
Taiwan has been heartened by a change in tone from Germany since Olaf Scholz became chancellor in late 2021, including a visit to Taipei this year by Germany's education minister and a visit by the Taiwanese justice minister to Berlin.
In a departure from the policies of former chancellor, Angela Merkel, Scholz's government last month unveiled a new China strategy to reduce dependence on the Asian economic superpower, hitherto a vital export market for German goods.
In June, Scholz told the German parliament he had warned China against using force against Taiwan.
APPROVAL EXPECTED
The EU included Taiwan on its list of trade partners for a potential bilateral investment agreement in 2015, but it has not held talks with Taiwan on the issue since, despite Taipei's repeated calls for progress.
A BIA would be politically significant for Taiwan given its diplomatic isolation and general exclusion from most global bodies and agreements, though it is a World Trade Organisation member.
The TSMC investment in Germany will need approval by Taiwan's economy ministry, and Wang said they would also consider the company's "vigorous" investments at home when weighing the German plans.
A source familiar with the German talks told Reuters that approval was likely not a problem given that the plant will be making less advanced chips for the auto industry, rather than higher-end, more profitable chips for things such as artificial intelligence applications.
"It will free space in Taiwan to make more valuable chips," the source said, requesting anonymity as they were not authorised to speak to the media.
TSMC's overseas expansion, which includes new factories in the United States and Japan, has sparked concerns in Taiwan, where semiconductor manufacturing is the backbone of the economy, about a "goodbye to Taiwan" trend among chip firms.
TSMC has repeatedly said its most advanced manufacturing and research will remain rooted in Taiwan, Wang said, but that more chip production overseas was part of a global trend about giving greater resilience to supply chains.
"This is unavoidable," she added.