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 spoken for by American and Taiwanese fabs.

As it stands, Intel will walk away with the lion's share of the funding for its Magdeburg megafab, where it plans to produce angstrom-class parts beginning in 2027. After months of negotiations over rising operating and materials costs associated with building in the region – the facility is now expected to cost €30 billion to complete – the x86 titan received commitments from German officials in June for €10 billion in support.

Another €5 billion will reportedly go to TSMC to build a fab in Dresden at an estimated total cost of €10 billion. According to TSMC chairman Mark Liu, the Taiwanese giant is in talks with industry partners regarding the fab project, which would produce "automotive specific technologies." However, details of the project have yet to be finalized.

Germany's Infineon Technologies, meanwhile recently began work on a €5 billion fab outside Dresden. The facility will produce analog mixed-signal technologies and power semiconductors on 300mm wafers when it comes online in 2026. For its trouble the company expects to receive about €1 billion in funding.

ZF Friedrichshafen, a German auto supplier, will also receive funding to the tune of €750 million for a joint fab built in collaboration with US power semiconductor manufacturer Wolfspeed, near Saarland.

That leaves just over €3 billion for other projects in the country.

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To pay for it all, Berlin will raid the country's Climate and Transformation Fund, which totals €177.5 billion, Bloomberg reported on Monday, citing people involved in the negotiations.

The fund, better known as the KTF, was created to promote electrification, develop EV charging infrastructure, expand hydrogen infrastructure, and improve energy efficiency. However, the Euro nation has since decided to widen the fund's scope to include, among other things, building chip shops.

According to the US news wire, the decision was sparked by revelations regarding Europe's reliance on Asia-Pacific semiconductors in the wake of the COVID-19 pandemic, the ongoing war in Ukraine, and worsening trade relations between America and China.

Many of these same reasons contributed to the passage of US and European chip subsidy acts, which unlocked $53 billion and €43 billion respectively to promote domestic semiconductor manufacturing. ®