2024-08-18 17:52:00
The federal government is supporting the establishment of several chip manufacturers in eastern Germany with billions of euros. But whether this is a good idea is controversial among experts.
Infineon, Intel, TSMC: Last year, several global corporations announced that they wanted to set up new locations in eastern Germany. A great opportunity to move the region forward economically and, following experience from past crises, to strengthen supply chains in Europe. But the whole thing also has a clear and, above all, expensive catch: all of the projects depend on billions in federal support. The effects of this are controversial.
Klaus-Heiner Röhl, an economist at the employer-friendly German Economic Institute (IW) in Cologne, said in an interview with t-online: “The subsidies for large corporations in East Germany have a double effect. On the one hand, they ensure that Germany has the opportunity to participate in international technology competition. On the other hand, they are important for the economic convergence process between East and West Germany.”
There are still significant differences in income levels. In 2023, the average income in the west was 4,578 euros, while in the east it was 3,754 euros. The establishment of specialized companies therefore potentially also brings with it better-paid jobs.
According to Röhl, the effects can go well beyond that. “Such sums can change a location permanently, but the full ripple effects will only be felt in ten to twenty years,” said the economist.
But what and where exactly is being invested? Several large chip companies were lured to East German locations with the prospect of billions in subsidies, including industry giants Infineon, Intel and TSMC.
The background to the investments is the experience from the corona pandemic and the effects of the war in Ukraine. Within a very short time it became clear that the long supply chains are particularly vulnerable when it comes to semiconductors. The establishment of a chip industry with its own production facilities in Germany is intended to prevent future bottlenecks and dependence on individual production countries.
The legal basis for this is the European Union’s Chips Act. This provides for a total volume of 43 billion euros in public and private investments to double the share of European semiconductor production in the global market to 20 percent by 2030.
One of the major investments in Germany is already being implemented. The German chip manufacturer Infineon has been building a new plant in Dresden since May. Production is to begin there as early as 2026. The company recently refuted concerns that this start could be delayed. “The two projects in Dresden in which we are involved are fully on schedule,” CEO Jochen Hanebeck told the “Süddeutsche Zeitung”.
The plant is expected to create 1,000 new jobs. Dresden is already one of Infineon’s largest locations. A good 3,250 people currently work there, and the company has a total of 56,200 employees worldwide.
The cost: Infineon is investing five billion euros, with the federal government contributing another billion. Federal Minister of Economics Robert Habeck justified this by saying that the company’s innovations are “necessary for the transformation towards climate neutrality”. The semiconductors to be produced in Dresden are “necessary for the use of renewable energies or for e-mobility”.
The market leader is also set to come to Germany
Infineon is also involved in another project: the company has a ten percent stake in the new Dresden factory of the Taiwanese chip manufacturer TSMC. The groundbreaking ceremony for the ten billion euro factory is scheduled to take place on Tuesday. The German government is supporting the project with five billion euros.