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
Postdoctoral Researcher, Bard College Berlin; WZB Research Fellow
Executive Director, Asia-Europe Institute, Universiti Malaya
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Last Update: 15/08/2023