Germany diverts €20B from climate funds to support chip fabs.

Germany diverts €20B from climate funds to support chip fabs.

Germany Invests €20bn from Climate Fund to Boost Semiconductor Production

Germany’s finance ministry is making a bold move to bolster local production of semiconductors by investing €20 billion from its climate fund. These critical components are used in a wide range of devices, including smartphones and fridges. In light of the ongoing war in Ukraine and worsening trade relations between the US and China, which threaten the global supply chain, Germany is taking proactive measures to ensure its chip industry remains competitive.

The largest portion of the subsidies, approximately €10 billion, will be allocated to Intel’s planned megafab in Magdeburg. This facility will focus on producing advanced Angstrom-era chips, and its total cost is estimated to be around €30 billion. The negotiations between the American chip giant and the German government have been lengthy, but Intel successfully secured the funding necessary for the project.

Additionally, Taiwan’s TSMC will receive €5 billion in subsidies for the construction of its proposed plant in Dresden. This facility will specialize in building microcontrollers, which are widely used by automakers. Another German chipmaker, Infineon, will receive approximately €1 billion to fund a €5 billion chip factory in Dresden as well. This region, known as “Silicon Saxony,” has a high concentration of microelectronics companies.

Germany is not stopping there in its efforts to boost local semiconductor production. German automotive supplier ZF Friedrichshafen AG and US-based chipmaker Wolfspeed are also expected to receive state funds to establish a silicon carbide chip factory near the French border in Saarland. The joint venture between the two companies aims to secure subsidies covering approximately 25% of the costs, equal to around €750 million.

After considering the subsidies allocated to the aforementioned projects, there will be just over €3 billion remaining for future semiconductor initiatives in Germany. This is a clear indication of the country’s commitment to strengthening its chip industry and reducing its dependence on imports.

Interestingly, the funding for these semiconductor projects will come from Germany’s Climate and Transformation Fund, which has a total worth of €177.5 billion. Initially established to support the scaling of green technologies such as electric vehicles, green hydrogen, and heat pumps, the fund’s scope has been expanded to include chip fabs. This decision reflects the urgency felt by the German government and the EU to secure a stable supply chain for semiconductors.

It is worth noting that the European Chips Act, which was recently passed, intends to increase the EU’s global market share of chips from 10% to 20% by 2030. This legislative action, combined with Germany’s substantial investment, demonstrates the determination of the European bloc to strengthen its position in the semiconductor industry.

In conclusion, Germany’s finance ministry is making a significant investment of €20 billion from its climate fund to boost semiconductor production within the country. This funding will benefit chipmakers such as Intel, TSMC, Infineon, ZF Friedrichshafen AG, and Wolfspeed. By leveraging climate funds for this purpose, Germany aims to safeguard its semiconductor industry and mitigate the risks posed by geopolitical tensions and trade disputes. Furthermore, the European Chips Act highlights the broader European ambition to increase its global market share in semiconductors.