German Government Plots €2 Billion For Chip Subsidies – Report

The stuttering attempt to grow the semiconductor supply chain resilience in Europe continues, with the German government reportedly readying billions of euros of fresh subsidies.

According to a report on Bloomberg, citing two people who attended an event about the funding plans, the German government is expected to offer about 2 billion euros ($2.11 billion) in chip subsidies.

It comes after the Covid-19 pandemic, and the resulting global semiconductor shortage, had exposed the world’s dependence on Asia (and mostly notably Taiwan) for the supply of advanced microprocessors.

New German subsidies

Meanwhile a spokesperson from Germany’s Economy Ministry reportedly said he could not confirm this figure of new chip subsidies.

However he told Reuters the German ministry plans to provide needs-based funding “in the low single-digit billion range.”

The ministry reportedly published a call for chips companies to apply for new subsidies in mid-November, for projects that contribute to a strong and sustainable microelectronics ecosystem in Germany and Europe.

“Funding is to be provided for the establishment of modern production capacities that significantly exceed the current state of the art,” the spokesperson from the Economy Ministry told Reuters.

Semiconductor shortages

As recently as August 2023, a senior Audi manager had warned that Covid-19 inspired semiconductor shortages had created bottlenecks for Germany’s car industry that would take years to resolve.

As a result of the chip shortages experienced during 2020, 2021 and 2022, various governments 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.

At the time Europe’s share of chip production stood at 8 percent – down from 24 percent in 2000.

Intel disappointment

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 pushing ahead with expansion in the United States.

That development was a setback for the German economy, which has been battling recession for two years.

TSMC Dresden

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, capital of the eastern state of Saxony in Germany, alongside a number of other industrial partners.

TSMC said at the time that the fab in Dresden marks a “significant step towards construction of a 300mm fab to support the future capacity needs of the fast-growing automotive and industrial sectors, with the final investment decision pending confirmation of the level of public funding for this project.”

The German government is to contribute up to 5 billion euros (£4.3 billion or $5.5bn) to the factory in Dresden.

In October 2024 a Taiwanese official revealed TSMC was planning additional chip factories in Europe with a focus on artificial intelligence (AI) chips, but did not specify a time frame for the company’s European plans.

Meanwhile other nations have also unveiled similar semiconductor incentive packages including South Korea, Taiwan, and Japan.

And China in September 2023 revealed plans for a state-backed investment fund to raise about $40 billion for its domestic semiconductor sector.