The pandemic, with its chip shortage, taught advanced economies a lesson. Authorities in countries such as Germany soberly assessed the risks associated with the domestic industry’s dependence on semiconductor component supplies and took steps to build their own chip manufacturing facilities.
By 2027, the German government will provide up to 20 billion euros in subsidies to companies that build chip manufacturing facilities in the country, Bloomberg noted, citing available information on the government’s budget plans.
The source of funding for these projects will be the so-called Climate and Transformation Fund, which was originally created to meet the decarbonization needs of the national economy. But in the context of a budget deficit, the plan can be adapted to finance projects to build enterprises from Germany’s semiconductor industry.
By the way, most of the subsidies will go to foreign companies, but the German authorities are apparently not too worried about this. The specified fund will manage funds in the amount of up to 180 billion euros, but only part of them will be aimed at stimulating the production of chips in Germany.
According to the sources, 10 billion euros will be allocated to Intel Corporation until 2027 to build two silicon wafer processing plants in the vicinity of Magdeburg. In this way, state subsidies will cover about a third of all the costs of the American corporation, which under the management of Pat Gelsinger is implementing a plan to expand production capacity.
At the recent quarterly earnings conference call, representatives of Taiwan’s TSMC revealed plans to build a contract chip manufacturing facility in Germany for the domestic auto industry. Focusing on mature lithography in this case slightly reduces the budget of the project, so at a total cost of 10 billion euros, half of the amount will be covered by government subsidies.
Around one billion euros could be used to subsidize Infineon’s chip manufacturing facility near Dresden, with a total construction budget of up to 5 billion euros. Another 750 million euros could go to the joint venture between ZF and Wolfspeed to produce power semiconductor components based on silicon carbide, which are in demand in the automotive industry.
Bosch and GlobalFoundries are also set to expand their chip manufacturing facilities in Germany. So the 20 billion euros in subsidies will quickly find grateful recipients.
The German initiative cannot be compared in scale with the US subsidy program of more than $52 billion over the next five years under the so-called “Chips Act”. Japan, on the other hand, has committed only $14 billion over the next few years, and India expects to attract investors to build domestic chip factories through subsidies of $10 billion.
EU authorities are generally set to support the domestic semiconductor industry, committing €43 billion before the end of the decade, but Germany, with its own separate programme, is carving out a central role. Poland, France, Italy and Spain are also applying for EU subsidies to build local semiconductor plants.