back to article Germany raids climate piggy bank for €20B to bankroll chip fabs

German Chancellor Olaf Scholz reportedly plans to siphon €20 billion ($22 billion) from the country's Climate and Transformation Fund to offset the cost of building semiconductor manufacturing plants. And while those billions will be available to both German and international chipmakers, the vast majority have already been …

  1. Flak

    Strategic investment

    Hopefully this gamble will pay off for the German economy - have seen many inward investment projects fail over the years with government support funds vanishing and not delivering the promised benefits.

    The strategic play of onshoring semiconductor production is the right one as crucial supplies and services should not be outsourced to others (particularly potential foes) - a lesson Germany learned the hard way with its heavy reliance on Russian gas.

    1. blackcat Silver badge

      Re: Strategic investment

      One thing I've not seen is any talk about the rest of the supply chain. Wafers, photo resists etc.

      This is quite an interesting history of EUV

      https://www.youtube.com/watch?v=8_OOta7Y6Ik

      And this person has done several others on the subject.

      The photo resist is key and currently sourced from Japan as are the machines to test and make the masks.

      1. DS999 Silver badge

        Re: Strategic investment

        They aren't worried about stuff coming from allies, it would be totally impractical to make everything at home. Least of all the EUV scanners, which come from a single country (but from elsewhere in the EU so maybe close enough to "home" for Germany)

    2. Roland6 Silver badge

      Re: Strategic investment

      Gamble probably needs Germany to influence the EU and to pass a directive covering the sourcing of semiconductors from EU fab’s.

      Starting early, would also influence the foreign owned fab owners to actually meaningfully use the EU fab’s, eg. Intel actually produce current generation CPUs in Europe and not just lower spec peripheral logic chips.

      1. blackcat Silver badge

        Re: Strategic investment

        Also assemble the PCBs locally. I have no doubt that the mobos in most phones, laptops, PCs etc are currently made in the far east.

        1. Anonymous Coward
          Anonymous Coward

          Re: Strategic investment

          Most, absolutely. We do have such facilities in Europe and the UK. Notably the Sony-owned one doing the final assembly of the RasPi. Or Amstrad, which did very well out of final assembly in the UK (still making TV set top boxes I believe).

          The headache for manufacturers in the these types of low cost and relatively low-skill elements of the supply chain are the Euro labour costs. Though if that is better for overall Trade Balance than importing (to say nothing of security) then, frankly, why not?

          Pres. Xi. has been (relatively) quiet of late, but if he were to make a move in the far east; then the (military) time is now while Western militaries are depleted. And before deals like AUKUS beef up the alternatives.

          1. blackcat Silver badge

            Re: Strategic investment

            The price difference of assembly in China vs Europe is crazy. Even for a hobby electronics. Compare PCBTrain (UK) and say JLCPCB (China), it is almost 10:1 cost difference between the two.

      2. Charlie Clark Silver badge

        Re: Strategic investment

        I can't see all the funding mentioned in the article being approved by the EU or by the other parties in the coalition.

        1. Jellied Eel Silver badge

          Re: Strategic investment

          I can't see all the funding mentioned in the article being approved by the EU or by the other parties in the coalition.

          But who runs Bartertown?

          It'll be approved. Germany's economy is a basket case thanks to energiewende and it's in the process of de-industrialising due to high energy and labor costs. So this will be pitched to the EU as a GoodThing(tm) because remaining EU tech industry needs chips with everything, from washing machines to hypersonic missiles. Ok, so most of those aren't actually currently made in the EU, and will probably never be unless the EU gets it's costs under control. And then thinks about all the other components needed to turn angstrom-class chips into anything useful, because those components aren't made in the EU either. A lot of the chip shortages seem to be for far simpler to manufacture chips anyway. But churning those out by the millions is much less sexy than being able to announce a bleeding-edge fab plant that produces chips for rather niche applications like playing Crysis during an economic collapse.

    3. Charlie Clark Silver badge

      Re: Strategic investment

      These subsidies won't create meaningful jobs and will effectively just hand money to corporate shareholders. We had this all before after unification: lots of promises, lots of subsidies, no significant jobs, companies pissed off when the tax breaks ran out. Magdeburg is also a terrible site for the Intel plant and will end up buggering the water table.

      1. I ain't Spartacus Gold badge

        Re: Strategic investment

        Chip fabs aren't normal factories. They tend to be insanely expensive to build, and so the chip companies run them constantly for as long as they can manage, to get back their investment. The article says Magdeburg is going to cost $30 billion. This means that it's a lot harder to just walk away when the subsidies end.

        Not that I disagree that this subsidy doesn't just end up being a handout to Intel's shareholders. And I suspect not all that strategic. Tempting TSMC to build fabs outside Taiwan so we don't lose as much global capacity if China invades Taiwan makes a lot of sense. There's an argument Taiwan's government should try to stop it, to incentivise the rest of the world to help them deter China more effectively. Having an Intel fab in Germany, rather than say the US or Malaysia or even another EU country risks wasting subsidies for little gain.

        But I wonder if it's because the German government has got these two massive off-budget funds for climate change & digital tranformation and for the Zeitenwende (foreign policy / military re-think). They have a constitutional balanced budget - and these are convenient ways to break it. But because they're not regular spending it's then hard to find things to spend them on effectively. Germany is struggling to spend it's military fund, and there's some suggestion that with Ukraine having fought Russia to a standstill, maybe it doesn't need to - and that cash can go to more popular (vote-winning) spending too?

        1. PhilipN Silver badge

          Re: Strategic investment

          Your para. 2, fourth sentence. Quite so. No way the Taiwan ruling party** will allow TSMC to share its crown jewels outside the territory. Hence automotive-specific only.

          ** Or - cough, cough - China for that matter, That is at least until they can match the expertise, which is the moving target dragging by the nose everything that China is doing.

        2. Charlie Clark Silver badge

          Re: Strategic investment

          There's definitely the temptation to use the off-sheet funds for pet projects but there isn't that much available given what it's already been earmarked for. The military spending shortfall has little to do with Ukraine and everything to do with procurement at the MoD. They've been trying to reform this at least since Ursula von der Leyen was defence minister (she spent an awful lot on external consultants). But there is also a lack of production capacity for all the things they know they need to replace.

          Intel renegotiated the deal to adjust the gearing so that Germany takes more of the risk, not surprising given how its sales have started to develop. The subsidies don't make sense: I think it's about € 1 million per job. But the real problem, which can't be solved by money, will be the ground water with Sachsen-Anhalt already effectively in permanent drought. This is a specialised fab that will have little or no resale value should Intel ever decide to walk away or, heaven forfend, go bankrupt. We've got several of these white elephants elsewhere in eastern Germany.

          1. blackcat Silver badge

            Re: Strategic investment

            It is like the LG plant they half built in south Wales. No use to anyone else after the fact so it got torn down.

            I did some work with the German army many many moons ago and it was possibly the most painful project EVER. The project had been spec'd as 'mostly COTS' with a few custom bits like enclosures and mountings. I think it was 9 years from signoff of the demonstrator to them coming back to order some more. In the mean-time we'd EOL'd every single part that made up the system.

    4. Pete Sdev

      Re: Strategic investment

      Noteworthy is that 2 of the planed fabs are in the former East Germany (Magdeburg, Dresden) which is still, over 30 years later, economically weaker than the Western half of the country.

      This is unlikely to be coincidence, but also part of a strategy.

  2. codejunky Silver badge

    Hmm

    The climate emergency involves producing chips. Who knew

    1. Anonymous Coward
      Anonymous Coward

      Re: Hmm

      Hmm

      Yes, it's all about the starchy and oh-so-delicious chips. Each time you munch on a bag of these greasy wonders, you're not just satisfying your taste buds; you're also combating global warming!

      Think about it: as the chippy industry booms, we'll have more potatoes being grown, which means more photosynthesis and increased carbon dioxide absorption.

      Furthermore, chips (and frying oil) can be recycled as biofuels! Picture this: fleets of chip-powered cars zooming down the streets, leaving behind a trail of mouthwatering aromas. Who wouldn't want to be part of that eco-friendly parade? Mmmmm.

      1. LybsterRoy Silver badge

        Re: Hmm

        Had to upvote. Your lunacy is in a class of its own (and if it isn't it should be)

      2. codejunky Silver badge
        Thumb Up

        Re: Hmm

        @AC

        You paint a vivid picture there. The only problem is I am now hungry

  3. Tron Silver badge

    That is bare-faced fraud.

    Luckily for them, they are politicians and can get away with stuff like that.

  4. MachDiamond Silver badge

    Might there be other issues

    Government is usually staffed with a load of lawyers. They are given the keys to the vault which makes the easiest answer to many problems one of just throwing money at it. If there aren't fabs in Germany, perhaps there's a reason that can't be remedied with cash. The US makes leading edge firms go through the State department for permission to export their product. If the company builds their fab in Malaysia, there isn't those same restrictions so they build in Malaysia and not the US. There could also be so many regulations put in place via overlapping agencies that all want to flex their prerogatives by conducting surprise inspections that it's too disruptive to be in the US. The cost and paperwork/compliance to dispose of waste could be too expensive. The list goes on and on.

    What I'm getting at is that it isn't always the case that giving away loads of money is the way to get industries to build within a country or region. The issue with EV public charging isn't the cost as much as the regulatory nightmare of approvals and permits to construct charging stations. This leads to stupid things like having a 50 space facility rather than 5 ten space locations dotted around an area. The cost of the permits, planning and squeeze for each site puts the economics out of kilter with each site costing the same for 10 spaces as it costs for the 50 in non-construction expenses.

    1. Roland6 Silver badge

      Re: Might there be other issues

      >” The issue with EV public charging isn't the cost as much as the regulatory nightmare of approvals and permits to construct charging stations.”

      I hadn’t really appreciated that every (UK) mobile mast and its upgrade to 5G requires a planning application, which in turn requires a set of drawings and documents…

      A friends post lockdown job has been doing the drawings for such applications.

      1. MachDiamond Silver badge

        Re: Might there be other issues

        "I hadn’t really appreciated that every (UK) mobile mast and its upgrade to 5G requires a planning application, which in turn requires a set of drawings and documents…"

        My thought is the solution for that and EV charging stations is for companies to be able to get their plans approved at a higher level. Once the plans have gone through checks at a county or state level and are approved, the only thing a local planning board can look at it is if the site chosen is proper for that type of facility and can, of course, inspect that work being done agrees with the plans. This means that the plans, drawings and documents can just be Xeroxed and one of several pre-approved designs submitted to a local agency to fit the requirements of the area. McDonalds has master plans for their restaurants and measured drawings down to mm's. All of the engineering has been done and signed off/stamped. If you've never seen how fast they build one of those, don't blink. At this point they might arrive after the concrete is dry enough as a flat pack, cartoons included. I see that as brilliant and should be emulated.

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