Germany earmarks 20 billion euros in subsidies for chip industry

By Riham Alkousaa and Supantha Mukherjee

BERLIN/STOCKHOLM (Reuters) -Germany plans to invest around 20 billion euros ($22.15 billion) in the semiconductor industry in the coming years, the economy ministry said on Tuesday, as it seeks to attract global chipmakers to set up factories in the country.

European governments want to lower dependency on Asian countries for semiconductors and build capacity in the region by offering subsidies through the EU Chips Act that aims to double the bloc's share of global chip output to 20% by 2030.

Intel last month laid out plans to spend more than 30 billion euros to develop two chip-making plants in Magdeburg, Germany's biggest ever foreign investment.

The ministry said Taiwanese semiconductor manufacturer TSMC has also expressed interest in investing in a semiconductor production facility in Germany and that the ministry was in close contact with the company over an investment decision.

TSMC, the world's largest contract chipmaker, has been in talks with the German state of Saxony since 2021 about building a fabrication plant, or "fab", in Dresden.

Of the total package, Intel will get subsidies worth nearly 10 billion euros. The rest would go to other chipmakers including Infineon, GlobalFoundries and TSMC.

Analysts expect TSMC to get billions in subsidies, but that might lead to other chipmakers asking for more. The government has not disclosed the subsidy TSMC might get.

"The issue we have is that while GlobalFoundries has been directed to millions in funding, TSMC, the dominant player, is getting billions of euros," GlobalFoundries CEO Tom Caulfield told Reuters.

"This is why we think there will be market distortions," he said.

GlobalFoundries, which has been in Germany for decades, has been expanding its capacity in Dresden. Chipmaker Infineon is also building its 5-billion-euro semiconductor plant in Dresden, due to start production in 2026.

The German subsidies will be drawn from the Climate and Transformation Fund from 2024 onwards, the ministry said, adding that it could only give funding for individual projects after European Commission approval.

The amount is subject to approval from the European Commission.

($1 = 0.9029 euro)

(Reporting by Riham Alkousaa in Berlin and Supantha Mukherjee in Stockholm; Editing by Friederike Heine, Louise Heavens and Jonathan Oatis)