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Germany to Pay For Chip Plants

Intel, the Silicon Valley chip-making giant, paved the way last year when it picked the German city of Magdeburg as the site for its first semiconductor factory in Europe, pledging to invest 17 billion euros (about $18.3 billion) — provided that Berlin throw in nearly €7 billion in subsidies.

Wolfspeed, a North Carolina-based maker of silicon carbide chips used in electric cars, decided last month that southwestern Germany would be the perfect place for it to invest €2.5 billion to build its first European factory. Again, the agreement was contingent on hundreds of millions more from the government.

Infineon, Germany’s largest chip maker, is looking to add two plants in Dresden, spending €5 billion, but it wants the government to cover about a fifth of that.

Each of the projects promises to help ease the shortages of microchips that German industries have faced since the pandemic and create thousands of jobs. For the chip makers, Germany offers a location in the heart of Europe near many of their customers.

But each project is also conditional on millions, if not billions, in government subsidies. Germany and the European Union find themselves in competition with the United States and other countries seeking the security of a robust domestic chip industry. Dangling bountiful subsidies and other benefits is the price for landing these companies.

Handing out subsidies is complicated in the European Union, because Brussels controls such aid to avoid distortions within its single market. The assistance for these chip makers will be financed by the national and regional governments, as well as E.U. funds to stimulate investment.

The pots of public money being lavished on these companies reflect the critical need for their tiny slivers of silicon.

“The shift toward electric vehicles is highly dependent on semiconductors. The shift toward renewable energy is also highly dependent on semiconductors,” said Thomas Kirschstein, a microchip expert with Roland Berger, a consulting firm. “All of the megatrends that you have in the world rely on semiconductors to produce the end product.”

BUSINESS

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2023-03-27T07:00:00.0000000Z

2023-03-27T07:00:00.0000000Z

https://timesdigest.pressreader.com/article/281530820277032

New York Times