Intel's $50 Billion Investment Leads Global Chip Expenditure Surge

According to a report from Bloomberg, there is a global trend to construct local factories and reduce reliance on overseas suppliers. This shift is driving increased investments in the industry. Last week, Intel Corporation made headlines by announcing its plans to invest over $50 billion in building new factories in Poland, Germany, and Israel, leading the surge in chip expenditures.

To attract semiconductor companies like Intel, TSMC, and Micron Technology, the United States, European Union, Japan, and India have collectively committed to providing over $100 billion in subsidies for local manufacturing facilities.

In Europe, Intel's largest venture will be a €30 billion factory in Germany, for which the company secured subsidy schemes worth around €10 billion through negotiations. This exceeds the initial offer of €6.8 billion from the German government.

Other players in the industry, such as STMicroelectronics NV and GlobalFoundries Inc., have also received significant subsidies of around 40% through the European Union's chip legislation. TSMC is currently in talks with the German government to negotiate a 50% subsidy for its new semiconductor factory in Dresden, a similar offer to what Japan provided. The total investment for TSMC and its partners in the German facility could reach €10 billion.

While there are potential benefits to these investments, companies like TSMC have highlighted challenges such as rising operational costs, potential workforce shortages, and labor union issues that may be faced when establishing factories in Germany.

However, governments that provide excessive subsidies may face opposition from taxpayers concerned about inflation and rising interest rates.

It's important to note that the efforts of governments worldwide to establish domestic chip supply chains may lead to increased costs without achieving complete self-sufficiency, as warned by TSMC founder Morris Chang.

Clemens Fuest, Director of the IFO Institute for Economic Research in Germany, also raised concerns about the meaningfulness of subsidies for domestic chip production. Fuest emphasized that despite substantial funding, a significant portion of chips will still need to be imported, reaching up to 80%.

Overall, the global electronic components industry is experiencing a shift towards local manufacturing, driven by incentives and subsidies from governments, although challenges and potential limitations remain.