29 Nov 2023 -
 General

Uncertainty looms over German chip fab funding for Intel and TSMC

German government Reichstag

Germany’s ambitious plans to become a hub for semiconductor manufacturing, involving major players like Intel and TSMC, have hit a significant roadblock following a recent ruling by the country’s Federal Constitutional Court, reports The Register. The court deemed the government’s reallocation of €60 billion from pandemic support measures to its Climate and Transformation Fund in 2022 unconstitutional. This fund, intended to cover about €210 billion for 2024 to 2027, included subsidies for setting up local chip factories by Intel and TSMC.

The ruling has put the future of these subsidies in jeopardy, with a budget committee member calling for their removal. Consequently, the government has implemented a budget freeze, leaving the fate of the chipmaking subsidies uncertain.

Intel’s engagement with the German government, resulting in a €10 billion subsidy towards a planned wafer fabrication facility in Magdeburg, Saxony-Anhalt, is now under scrutiny. Intel had anticipated investing over €30 billion in the site, meaning the subsidy would cover about a quarter of the construction costs.

Similarly, TSMC’s joint venture plans for a 300mm wafer fabrication facility outside Dresden, involving European chip companies like NXP, Infineon, and Bosch, are also in limbo. The total cost of this project was estimated at €10 billion, with subsidies expected to cover half. TSMC had committed €3.5 billion, with its partners contributing the remaining €1.5 billion.

Michael Kellner, Germany’s State Secretary for Economic Affairs, has expressed concern over the viability of these projects without the Climate and Transformation Fund, also mentioning the reconstruction of the solar industry in East Germany.

The uncertainty over the subsidies has raised questions about the future of these chipmaking facilities. Intel had already delayed the start of its Magdeburg site construction at the end of last year, a move interpreted as a bid for more government funding.

Neither Intel nor TSMC had commented on how the court ruling might affect their plans. Both companies have experienced significant revenue drops over the past year, with the global semiconductor market in decline.

This financial dilemma has left the German coalition government in a precarious position, with a €60 billion gap in the budget and mounting pressure from the electorate and industrial leaders. The Bundestag is now reportedly considering releasing the country’s self-imposed debt brake to navigate this crisis.

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