Thu, Jun 22, 2023 page11

• Chip production race touches off spending spree

  • Bloomberg
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  The global race to build domestic factories and sever dependency on overseas suppliers for semiconductors is spurring a spending boom, and the biggest beneficiaries so far are arguably the chipmakers.

  Just in the past week, Intel Corp announced plans for more than US$50 billion in new plants in Poland, Germany and Israel, spurred on by government incentives.

  Combined, the US, the EU, Japan and India have committed more than US$100 billion in subsidies to attract the likes of Intel, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and Micron Technology Inc.

  For chipmakers, the subsidies represent an important hedge against rising costs while they work to reshape the global manufacturing landscape. For the governments, the plants mean jobs, investment in infrastructure and supply-chain security for the semiconductors needed for everything from automotive production and mobile phones to home appliances. Confronted with Russia’s invasion of Ukraine and China’s perennial threat to take over Taiwan by force, they are betting that more plants in more countries insulates them against disruptions.

  Intel’s biggest layout in Europe would be its 30 billion euros (US$32.8 billion) plant in Germany, where it negotiated a subsidy package valued at about 10 billion euros.

  Intel said its new site in Magdeburg is expected to create 7,000 construction jobs during the initial building phase, as well as about 3,000 permanent high-tech jobs and tens of thousands of additional positions “across the industry ecosystem.”

  The German government and the Santa Clara, California-based chipmaker originally agreed to about 6.8 billion euros in subsidies. However, the company was able to argue that the cost to build the plant, originally estimated at 17 billion euros, had ballooned because of technological advances, inflation and higher energy costs. Germany agreed to add another 3 billion euros in state aid in a package that includes price caps.

  STMicroelectronics NV and GlobalFoundries Inc have gotten about 40 percent of their costs subsidized via the EU Chips Act, people familiar with the matter have said.

  TSMC, the world’s biggest contract chipmaker, is in long-running talks with the German government for as much as 50 percent of its new semiconductor plant in Dresden, on par with what Japan offered the company. The company and its partners might spend as much as 10 billion euros to build the facility.

  TSMC executives have repeatedly talked about higher operating costs with its ongoing diversification push, and in the most recent annual shareholder meeting, chairman Mark Liu (劉德音) said the company might face challenges on human resource and labor unions in Germany.

  Still, governments that sink too much into these subsidies risk a backlash from taxpayers still grappling with soaring inflation and rising interest rates. Even TSMC founder Morris Chang (張忠謀) has warned that efforts by governments around the world to build domestic chip supply chains could push up costs and yet still fail to achieve self-sufficiency.

  When German chipmaker Infineon Technologies AG got 1 billion euros for its plant in Dresden, Clemens Fuest, the head of Germany’s IFO economic institute, warned that the trade-off of subsidies for homegrown chip production might not make sense.

  “My concern is that we are handing out a huge amount of money only to slightly increase security of the supply,” Fuest told German broadcaster ARD last month. “Even if it all works out, we will still be importing 80 percent of our chips.”
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