Chip Shortage Feeds Frustration, Inflation in US

Germany Wants to Invite Chip Makers for Local Production, Offers EUR 14 Billion as State Aid

Germany’s government wants to attract chip makers with EUR 14 billion (roughly Rs. 1,13,132 crore) in support, Economy Minister Robert Habeck said on Thursday, adding that the lack of semiconductors used in everything from smartphones to cars was a massive problem.

A global chip shortage and supply chain bottlenecks have created havoc for car makers, healthcare providers, telecoms operators and others.

« It’s a lot of money, » Habeck told a gathering of family businesses in Hanover.

In February, the European Commission set out plans to encourage chip manufacturing in the European Union due to a boom in demand, with proposed new legislation to ease state aid rules for chip factories.

In March, US chipmaker Intel announced it had picked the German town of Magdeburg as the site for a huge new EUR 17 billion (roughly Rs. 1,37,358 crore) chipmaking complex. Government sources said at the time the state was promoting the project with billions of euros of funds.

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

« We must develop our own strategy to secure primary materials, » he said.

The US chipmaker is spreading its investments in Europe around half a dozen countries, including boosting its existing factory in Ireland, setting up a design and research facility in France, and a packaging and assembly site in Italy.

The initial spending will total EUR 33 billion (roughly Rs. 2,76,294 crore), including EUR 17 billion (roughly Rs. 1,42,337 crore) in Germany, where the auto industry is likely to be a prime customer for cutting-edge chips that could use technology as small as 2-nanometers.

German automaker Volkswagen highlighted the pain caused by chip shortages on Tuesday, saying it sold 2 million fewer cars than planned last year due to the issue.

© Thomson Reuters 2022