Spain finds few takers for $12b in microchip subsidies

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After facing significant supply-chain disruption during the pandemic, the EU and the U.S. are racing to increase chip production, with governments keen to reduce their dependence on countries like Taiwan and South Korea.

The U.S. Chips Act passed both houses of Congress last week, including $52 billion in grants and incentives for domestic semiconductor manufacturing, and China is also investing heavily to catch up.

The EU’s chips plan has gained momentum in nations with existing semiconductor industries, putting them in competition with one another.

Spain has tried to lure Taiwan Semiconductor Manufacturing, but the company is expected to opt for Germany, where there is already a large chip ecosystem in the eastern state of Saxony. TSMC, the world’s premier chip foundry based in Taiwan, has been talking to the German government for over a year about setting up a factory, but a decision is unlikely anytime soon.

The former East Germany also got a huge boost back in March when Intel announced it would invest 17 billion euros to build a cutting-edge production site in Magdeburg.

Global Foundries and STMicroelectronics last month unveiled a 5.7 billion-euro project to make energy-efficient chips in France, while Samsung Electronics, another leader in semiconductors, floated the idea of a European expansion years ago but it has yet to materialize.

Spain’s Sanchez, a trained economist, sees the government’s chips project as a way to boost the country’s industrial base, which has shrunk since the turn of the century due to tougher competition from abroad.

The investment is also important for supplying the Spanish auto sector, which is Europe’s second-largest and accounts for about 10 percent of gross domestic product.

Some of the money will go toward research projects via the EU’s microelectronics IPCEI, or important projects of common European interest. These allow governments to channel state aid to smaller research projects.

Spain will also likely get EU funds to house a pilot production line from Imec, a Belgium-based research hub, according to a person familiar with the plan.

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