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Germany Shifts €20 Billion from Climate Fund to Fuel Semiconductor Revolution

In a strategic move amid geopolitical tensions, Germany funnels funds meant for green technologies to bolster local semiconductor production, with plans to allocate €20 billion to key players


In a bold financial move, Germany’s finance ministry has decided to re-allocate €20 billion from its sizable climate fund to supercharge domestic semiconductor production. These sophisticated microprocessors are the lifeblood of an array of modern-day technologies, ranging from smartphones to household appliances, and their production is crucial in a globally connected digital economy.

This substantial fund will be allocated to several chip manufacturing firms by 2027, Bloomberg reveals. Of this amount, the leading beneficiaries are American firm Intel and Taiwan’s TSMC, both prominent players in the international semiconductor market.

Intel is setting its sights on Magdeburg, Germany, where it plans to construct an ambitious mega-factory that will churn out cutting-edge Angstrom-era chips. The American tech giant has managed to negotiate an impressive €10 billion subsidy from the German government after enduring months of discussions. The total estimated cost of this mega-factory stands at an astounding €30 billion.

Meanwhile, TSMC, a Taiwanese semiconductor behemoth, has been earmarked to receive €5 billion for its proposed plant in Dresden. The plant is set to focus on producing specialized microcontrollers, an essential component for automotive manufacturers. On the same note, Infineon, a home-grown German chipmaker, will be allotted approximately €1 billion for its €5 billion chip factory. This facility is also destined for Dresden, a region fondly referred to as ‘Silicon Saxony’ due to the high concentration of microelectronics firms.

Additional recipients of these substantial subsidies include ZF Friedrichshafen AG, a German automotive supplier, and Wolfspeed, a US-based chipmaker. They intend to form a joint venture to establish a silicon carbide chip factory near the French border in Saarland. Their venture seeks state funds to cover roughly a quarter of the projected costs, approximating to €750 million.

Once these allocations are dispersed, around €3 billion remains for future semiconductor ventures within the country.

Intriguingly, this financial maneuver sees the resources being drained from the Climate and Transformation Fund, a hefty €177.5 billion pool originally purposed to enhance green technologies. Among these were electric vehicles, green hydrogen technologies, and heat pumps.

However, in light of geopolitical tensions and critical trade issues, Germany has broadened the fund’s purview to encompass semiconductor factories. The volatile situation in Ukraine and the deteriorating trade relationships between America and China have threatened global supply chains, and as such, the decision to funnel money into local production appears pragmatic and strategic.

This audacious reallocation of climate funds signifies Germany’s commitment—and, indeed, the commitment of the EU as a whole—to strengthening local semiconductor production. The recent passing of the European Chips Act further underlines this commitment, with an ambitious goal to boost the EU’s share of the global semiconductor market from 10% to 20% by the year 2030.

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