Germany Confirms Off-Budget Fund to Support $22 Billion Chip Aid

Germany’s economy ministry said that the government is preparing aid worth about €20 billion ($22 billion) to support the development of local semiconductor production in the coming years.

(Bloomberg) — Germany’s economy ministry said that the government is preparing aid worth about €20 billion ($22 billion) to support the development of local semiconductor production in the coming years.

The money will be drawn from the off-budget Climate and Transformation Fund starting next year, the ministry said Tuesday confirming a Bloomberg News report on Monday. The time frame for the planned aid wasn’t specified. 

“We are only able to provide concrete funding amounts for individual projects once the European Commission has given its approval under state aid law and the funding decision has been handed over to the company,” the ministry said.

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European countries have been under pressure to attract investments amid economic uncertainty, stubborn inflation and the impact of the US’s Inflation Reduction Act. The bulk of Germany’s funds are earmarked for international companies, highlighting the country’s limited tech expertise. 

The German government has already agreed €10 billion in aid for a new Intel Corp. plant and is in the process of agreeing to about €6 billion more in subsidies to companies including Taiwan Semiconductor Manufacturing Co. and Germany’s Infineon Technologies AG. 

The economy ministry said the government also plans to support a $3 billion wafer factory that car-parts maker ZF Friedrichshafen AG and Wolfspeed Inc. plan to build in the Saarland region, as well as a battery-cell factory from Northvolt AB. 

The total aid plan indicates there’s still at least €3 billion available for additional investments. That could benefit other companies active in Germany. GlobalFoundries Inc. has a sizable presence in Dresden, while German supplier Robert Bosch GmbH also runs a chip plant in the city.

The use of the off-budget fund, known as KTF, allows Germany to support investment plans billions in cuts to spending next year, including social benefits. The fund has a total of as much as €180 billion to dole out.

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