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Germany makes new move to attract chip manufacturers

$14.7b in state aid on offer for companies to set up shop in the country

Germany's government is looking to attract chipmakers to the country by offering €14 billion ($14.7 billion) in financial support, apparently spurred on by global semiconductor supply chain problems.

The move follows the European Chips Act from the European Commission and Intel's decision earlier this year to build a new fabrication plant in Germany.

The latest announcement was made by Germany's vice chancellor and federal minister for Economic Affairs Robert Habeck at a business event in Hanover, according to Reuters, who said that his government wants to attract chip makers with €14 billion ($14.7 billion) in state aid.

He cited the recent chip shortages that are causing problems for myriad industries including the automobile sector and IT equipment makers, which have even reportedly led to some vendors buying washing machines to rip out the chips for reuse.

This latest move underlines the increasing importance that semiconductors play in the global economy, and how securing supplies is becoming an area of concern for leaders around the world.

In February, the European Commission unveiled its European Chips Act, which proposes a number of initiatives to boost semiconductor research and development within the EU and building new production capacities to lessen European reliance on chip supplies from countries such as China.

It starts with initial investment of €11 billion ($11.6 billion), which is expected to rise to more than €43 billion ($45 billion) of public and private investments by 2030.

"In the short term, this will increase our resilience to future crises, by enabling us to anticipate and avoid supply chain disruptions. And in the mid-term, it will help make Europe an industrial leader in this strategic branch," European Commission president Ursula von der Leyen said at the announcement of the European Chips Act.

The US is also trying to prime government investment in semiconductor manufacturing and R&D with the US CHIPS Act, which was signed into law in 2021 but needs a further piece of legislation – America COMPETES Act – to be passed in order to unlock a potential $52 billion of funding to boost chip production stateside.

India is also hoping to get in on the act, and is reported to be trying to tempt both Intel and Taiwanese chip maker TSMC to set up fabrication facilities in the subcontinent with a $10 billion subsidy plan that could be used to cover up to half of the cost of a new chip plant.

Intel has already chosen Germany to build a massive new chip fabrication facility at a site in Magdeburg. CEO Pat Gelsinger had previously stated that the company would be willing to pour up to €80 billion ($84.6 billion) into new semiconductor manufacturing plants across Europe as part of the chipmaker's intentions to become one of the largest foundry operators in the world.

Despite shortages and supply chain issues, the global semiconductor market is still expected to hit $676 billion during 2022, up by 13.6 percent over 2021, according to forecasts by Gartner. ®

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