The Impact of European/German Government Subsidies on Semiconductor Manufacturing Investment Decisions
Date: 29 August 2023 (Tuesday)
Time: 2:30 - 4:30 pm
Venue: (hybrid) ASEM Room, Asia-Europe Institute, Universiti Malaya, Kuala Lumpur, Malaysia
Online: Via Microsoft Teams
Geopolitics and supply chain resilience concerns have led to a rise in semiconductor-related industrial policy worldwide. This is especially the case in regions which have seen their shares in global semiconductor production decrease since 2000, such as the United States and Europe. As per the European Chips Act, Europe aims for an increase of its share in global frontend semiconductor production from the current 6% to 20% by 2030. The main policy instrument to attract the required investments to achieve this goal are subsidies. In the EU, it is prohibited for individual European Union member states to provide subsidies to manufacturing investments -- unless there are exemption policies for doing so. Two recent legislations, the EU Chips Act (ECA) and the Important Projects of Common European Interest (IPCEI) legislation allow for the provision of subsidies by member states to semiconductor investments under certain conditions. In this paper, we focus on Germany’s use of the ECA and IPCEI as the major provider of subsidies to semiconductor companies in the EU. Under the current iteration of the IPCEI for semiconductors, the German government has earmarked a total of €4bn in subsidies for 31 companies, and under the ECA, roughly €12bn for three different companies (to which more may be added).
During fieldwork in Germany (Dresden and Munich and its surrounding regions) in May 2023, we conducted interviews with national and regional policymakers, research institutes, and company representatives from 10 semiconductor companies to get an understanding of the impact subsidies have on semiconductor companies’ investment decisions in Germany, Europe and elsewhere. More specifically, we aim to understand how subsidies feature in semiconductor firms’ decisions to expand and invest into their manufacturing operations amongst a number of factors and drivers, which include geopolitical risks, supply chain resiliency, rising energy costs, and customer demands. In this paper, we present our preliminary findings, based on interview data and publicly available data from company publications, covering ten semiconductor companies which all have manufacturing plants in Germany and worldwide.
Professor of Politics, Bard College Berlin; WZB Visiting Researcher in Globalization, Work, and Production Research Group
Executive Director, Asia-Europe Institute, Universiti Malaya
Gale Raj-Reichert is Professor of Politics at Bard College Berlin. She holds a PhD in development studies from the University of Manchester Global Development Institute (2012) and teaches in the Politics concentration at Bard College Berlin. Her research is on labor governance in global production networks with a focus on the global electronics industry and outsourced manufacturing in the Asia Pacific region. Her research aims to understand how networked relationships and power asymmetries across different actors, such as governments, firms, and civil society organizations, shape and influence processes and outcomes for workers in outsourced factories of globalized industries.
Raj-Reichert held previous faculty positions at the University of Manchester and Queen Mary University of London. She has been the recipient of research grants from the British Academy and the German Research Fund. She is currently a Principal Investigator of a research project on geographical reconfigurations of global production networks in a post-COVID-19 global economy (funded by the German Research Fund 2023 to 2026). Raj-Reichert is an editor in chief at the journal Competition and Change. In 2019, she co-edited the Handbook on Global Value Chains (Edward Elgar).
Tobias Wuttke holds a PhD in International Studies from Roskilde University, Denmark. His research agenda lies at the intersection of development economics and global political economy, and is informed by economic geography and evolutionary economics. It looks at the implications of the emergence of global value chains (GVCs) for the prospects of export-led industrialization in developing and emerging economies. His doctoral research focused on the automotive GVC, and specifically on the South African automotive industry, researching the technological capabilities of local component manufacturing firms, linkages from the industry to other domestic economic sectors, and the role of industrial policy. His current research focuses on the electronics GVC, green windows of opportunity in manufacturing for developing countries, and the political economy of industrialization and industrial policy.
He previously worked for the German development organization GIZ in Botswana and Nigeria and obtained a MSc in Development Studies from the London School of Economics and Political Science.
Prof Dato’ Dr Rajah Rasiah obtained his doctorate in economics from Cambridge University in 1992 and served as a fellow at Harvard University in 2014. He was also the Dean of the Faculty of Economics and Business at UNIMAS (1999-2000), and at Faculty of Economics and Administration in the University of Malaya in 2009–2010 and 2013–2014. He also holds professorial fellow positions at the Centre for Rising Powers in Cambridge University, UNU-MERIT, and Technology Management and Development Centre in Oxford University. Among his prestigious awards include the Cambridge Journal of Economics Award by the Cambridge Political Economy Trust in 1992, the Robert McNamara Award by the World Bank in 1993, the Celso Furtado Prize for advancing the frontiers of Social Science thought (Economics) from the World Academy of Sciences in 2014, and the Merdeka Prize under the category of scholastic achievement in 2018 from the Merdeka Prize Committee. He was awarded the Distinguished Professor of Economics Position by the Ministry of Higher Education of Malaysia in 2017.
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Last Update: 15/08/2023
