How Germany is planning to invest €2 billion in its chip industry

Germany has revealed that it is planning to invest approximately €2bn in the country’s semiconductor sector, in the form of subsidies, according to Bloomberg. However, further details have not been revealed.

This is expected to go a long way in helping semiconductor companies significantly upgrade their current production facilities. 

Earlier this month, Germany’s economic ministry asked semiconductor firms to put forward their subsidy applications. However, the exact amount available as subsidies is still to be determined. 

This will likely be decided following the country’s next election, which is expected to take place in February 2025. 

The move follows Intel recently stopping plans to invest approximately €30bn in a semiconductor factory supposed to be located in Magdeburg. This has come as a major blow to Germany, as this project was supposed to be one of the biggest semiconductor plants in the country. 

Other companies such as ZF Friedrichshafen AG and Wolfspeed Inc have also put their German chip production plans on hold, further weakening Germany’s domestic semiconductor sector.

It had also received about €10bn worth of subsidies under the 2023 European Chips Act. However, the company had decided to postpone these plans as it tries to deal with soaring losses and declining sales. 

Semiconductors are used in a variety of devices, including cameras, mobile phones, microprocessors, satellites, military equipment and cars. 

Germany makes big moves in domestic semiconductor industry

Germany, along with several other major European economies, has been heavily investing in its domestic semiconductor industry in the last few years, in an attempt to rapidly scale up its production of sophisticated products. 

This is expected to contribute significantly to Germany’s global competitiveness, as well as reduce dependence on countries such as the US and China. This has become especially crucial following the supply chain blockages seen during the COVID-19 pandemic. 

Escalating trade and geopolitical tensions between China and the US, mainly over Taiwan, has also contributed to this pressing need for key European countries to develop their own semiconductor and artificial intelligence industries. This is mainly because of increased anxieties about China using advanced artificial intelligence technology for military and spyware applications. 

In order to support this, acts such as the European Chips Act have been established, which works towards improving the EU’s semiconductor industry as a whole, with an aim of increasing Europe’s semiconductor market share worldwide to 20% by the end of the decade.