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Germany offers £12bn to lure chipmakers to the country

“We must develop our own strategy to secure primary materials,” said Robert Habeck, Germany's economy minister.

Germany is determined to build up its chipmaking capacity. To achieve this, the country’s Ministry of Economy has announced it will offer €14bn (about £12bn) in financial support of the industry. 

The semiconductor shortage and the supply chain disruptions caused by the rise of demand in the wake of the pandemic, have created havoc in many industries that rely on this technology, including carmakers, healthcare providers and telecom operators. In this context, large corporations like Apple and Ford were forced to halt production processes, facing billions of dollars in losses.

The chip shortage is expected to last until at least 2024, according to Intel CEO Pat Gelsinger.

To address this challenge, the European Commission has set out plans to encourage chip manufacturing in Europe through the European Chips Act, which will enable €15bn (approximately £13bn) in additional public and private investments until 2030.

The announcement was followed by a £68bn European investment from Intel, that included the construction of a chip manufacturing plant in Germany, a design hub in France, as well as investment in R&D, manufacturing, and foundry services in Ireland, Italy, Poland, and Spain. 

"The European need for chips will double in the next decade," said European Commission President Ursula von der Leyen. "This is why we need to radically raise Europe's game on the development, production and use of this key technology."

The EU has a target of ensuring that, by 2030, 20 per cent of the world's microchip production takes place in Europe, and Germany wants to be the protagonist of this transition. 

Construction of the €17bn (£15bn) chipmaking plant is set to begin in 2030 in the German town of Magdeburg, with production scheduled to reach the markets in 2037, pending European approval.

"It's a lot of money," Habeck told a gathering of family businesses in Hanover.

The Magdeburg facility will house Intel’s two first-of-their-kind semiconductor fabs, where the company will deliver chips using Intel’s most advanced Angstrom-era transistor technologies, serving the needs of both foundry customers and Intel for Europe and globally as part of the company’s IDM (integrated device manufacturer) 2.0 strategy.

Habeck said there would be further examples like Magdeburg even though companies in Germany would remain dependent on producers elsewhere for components like batteries.

Despite shortages and supply chain issues, the global semiconductor market is still expected to grow 13.6 per cent over 2021, according to forecasts by Gartner.

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