Independent Chip Strategy Urged in Germany Following Intel's Rejection of DIW Berlin Proposal

Independent Chip Strategy Urged in Germany Following Intel's Rejection of DIW Berlin Proposal

In the face of escalating geopolitical tensions and global dependencies, particularly in the critical area of microchip production, Germany and the European Union (EU) are actively working to build their own semiconductor competencies. The country's new high-tech agenda aims to establish at least three new semiconductor factories domestically, positioning Germany as the leading semiconductor manufacturing centre in Europe [1][4].

The strategy involves a multi-faceted approach, with incentives and funding from the federal government and venture capital playing a significant role. This includes a German fund combining public and private money, designed to increase local production capacity and innovation in semiconductor technology [1]. Additionally, support for pilot projects, such as a supercomputer for vehicles, emphasises research and application of smart, energy-efficient semiconductors developed in Germany [1].

Cutting-edge facilities are also part of the plan, with a collaboration via the European Semiconductor Manufacturing Company (ESMC), a joint venture with TSMC, Bosch, and Infineon, building a state-of-the-art plant in Dresden [1]. However, challenges remain, as Intel recently cancelled its €30 billion semiconductor plant project in Magdeburg, Germany, citing unsustainable costs and difficulties in subsidy negotiations, and also scrapped a test and assembly site in Poland [2][3].

This cancellation is a setback for the EU’s broader goal of increasing chip manufacturing capacity within Europe to 20% of the global market by 2030, as targeted by the EU Chips Act [2]. Europe currently produces less than 10% of semiconductors globally, mainly older types used in automotive and industrial sectors, remaining dependent on Asia and the U.S. for advanced chips critical for artificial intelligence, defense, and healthcare [2].

Despite this setback, Germany and the EU remain committed to consolidating their chip production capabilities. The focus is on investing in new plants and promoting innovation, with a focus on niche and advanced semiconductor technologies to reduce dependence on imports from Asia and strengthen technological sovereignty [1][4].

Prof. Dr. Martin Gornig, Research Director for Industrial Policy in the Company and Markets Department of the German Institute for Economic Research (DIW Berlin), emphasises the importance of ensuring a secure supply of critical components like microchips. Initiatives under the Important Projects of Common European Interest (IPCEI) could be used to build domestic competencies in chip production [1].

In conclusion, Germany and the EU are pursuing a multi-pronged strategy to build semiconductor competencies through government incentives, joint ventures, research funding, and new factory construction. However, recent setbacks like Intel’s withdrawal highlight ongoing challenges in competing with global chip manufacturing giants [1][2][3][4].

The economic and social policy of Germany and the EU incorporates technology, as evident in their plans to promote innovation and establish local production capacity in semiconductors, particularly through the German fund for smart and energy-efficient semiconductor technologies. The focus on niche and advanced technologies is also technology-oriented, aiming to reduce dependency on Asian imports and strengthen technological sovereignty.

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