Germany earmarks 20 billion euros in subsidies for chip industry

Illustration picture of semiconductor chips on a circuit board Semiconductor chips are seen on a circuit board of a computer in this illustration picture taken February 25, 2022. REUTERS/Florence Lo/Illustration/

Germany plans to invest around 20 billion euros ($22.15 billion) in the semiconductor industry in the coming years, the economy ministry said on Tuesday, July 25, 2023, amid growing alarm over supply chain fragility and dependence on South Korea and Taiwan for chips.

The country was able to attract global chipmakers to set up factories by offering subsidies under the EU Chips Act that aims to double the bloc’s share of global chip output to 20% by 2030.

Intel last month laid out plans to spend more than 30 billion euros to develop two chip-making plants in Magdeburg, Germany’s biggest ever foreign investment, Reuters said.

The ministry said Taiwanese semiconductor manufacturer TSMC has also expressed interest in investing in a semiconductor production facility in Germany and that the ministry was in close contact with the company over an investment decision.

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TSMC, the world’s largest contract chipmaker, has been in talks with the German state of Saxony since 2021 about building a fabrication plant, or “fab”, in Dresden.

Of the total package, Intel will get subsidies worth nearly 10 billion euros. The rest would go to other chipmakers including Infineon, Globalfoundries and TSMC.

The money will be drawn from the Climate and Transformation Fund from 2024 onwards, the ministry said, adding that it could only give funding for individual projects after European Commission approval.

The amount is subject to approval from the European Commission.

While Germany has not disclosed how much will go to TSMC, GlobalFoundries criticised Berlin’s subsidies to its Taiwanese rival with its CEO Thomas Caulfield telling the Financial Times that these funds will “distort competition.”