Completing an Infineon semiconductor factory in Germany moved one step closer, after European Commission signed off on a German state aid package.

The European Commission announced that it has “approved, under EU State aid rules, a €920 million German aid measure for the construction of a new semiconductor manufacturing plant in Dresden.”

The approval will allow Infineon Technologies AG to complete the MEGAFAB-DD project, which will be able to produce a wide range of different types of chips.

Infineon factory

It should be remembered that it was only in November 2024 when the German government was reportedly readying billions of euros of fresh subsidies, to address the stuttering attempt to grow the semiconductor supply chain resilience in Europe.

And according to the EC, the German government had notified the Commission of its plan to support Infineon’s project to set up a new semiconductor manufacturing facility in Dresden.

The aid will take the form of a direct grant of up to €920 million to Infineon to support its investment amounting to €3.5 billion.

The plant will apparently produce two technology families: firstly discrete power technologies used for power switching, management and control in electronic systems; and secondly analogue/mixed-signal integrated circuits that are crucial for bridging the gap between the analogue and digital worlds.

The produced semiconductors will be used in industrial, automotive and consumer applications.

The new facility will be the first one in Europe that will be able to rapidly switch its production between the two technology families while maintaining its high output capacity.

It will be a front-end facility, covering wafer processing, testing and separation.

The plant is expected to reach its full capacity in 2031.

Chip shortage

The European Union has for years sought to encourage the construction of chip factories in the bloc, after the shock chip shortage during the Coronavirus pandemic of 2020 and 2021 that had exposed the world’s dependence on Asia (and mostly notably Taiwan) for the supply of advanced microprocessors.

As a result of the chip shortages experienced during 2020, 2021 and 2022, various countries and regions pledged to attract chip manufacturing to their areas with huge subsidy programs.

This was evidenced by the $52 billion US Chips Act, and the 43 billion euro European Chip Act, which are being used to encourage the building of more chip manufacturing capabilities in their respective locations.

The EC plan to encourage more chip factories in Europe had first been revealed by Ursula von der Leyen back in 2021, when in March of that year the European Union under its 2030 Digital Compass plan announced it wanted to produce at least 20 percent of the world’s cutting-edge semiconductors by the end of the decade.

But Europe’s great semiconductor hopes received a notable setback in August 2024, when Intel said it would pause development of two planned chip factories in Poland and Magdeburg, Germany for two years, while pressing ahead with expansion in the United States.

However the world’s largest contract chip manufacturer, Taiwan Semiconductor Manufacturing Co (TSMC) had said in August 2023 it would invest 3.5 billion euros (£3bn or $3.8bn) in a factory in Dresden, alongside a number of other industrial partners.

Sixth approval

The European Commission said its approval of the German aid package for Infineon is the sixth Commission decision to support European chip production.

On 5 October 2022, the Commission approved, under EU State aid rules, an Italian measure to support STMicroelectronics in the construction of a SiC wafer plant in Catania, Sicily.

In addition, on 28 April 2023, the Commission approved a €2.9 billion French aid measure to support STMicroelectronics and GlobalFoundries in the construction of a new microchips manufacturing facility in Crolles, France.

On 31 May 2024, an additional Italian measure was approved to support STMicroelectronics in setting up a new integrated SiC manufacturing facility in Catania, Sicily.

On 20 August 2024, the Commission approved a German measure to support European Semiconductor Manufacturing Company in setting up a microchip manufacturing plant in Dresden, Germany.

Finally, on 18 December 2024, the Commission approved an Italian measure to support Silicon Box in setting up a new advanced packaging and testing facility in Novara, Italy.

Infineon had made headlines back in 2009, when it was widely reported at the time that Intel was seeking to acquire its wireless chip business.

A year later in 2010, Intel succeeded in buying the chip maker’s wireless chip unit.

In December 2022 the boss of Infineon said the German chip maker was ready to spend billions of euros on acquisitions, in a number of specialist fields.