Dresden The marquee is already up: On Tuesday, Infineon boss Jochen Hanebeck invites you to the ground-breaking ceremony for the chip manufacturer’s latest plant. The Dax group puts five billion euros into a factory in Dresden, it is the largest investment by Munich of all time.
But that’s not the only reason why the manager will welcome a lot of political celebrities from Berlin and Brussels. Rather, the start of construction for the Chancellery and the EU Commission is a sign that Europe’s race to catch up with chips is finally picking up speed.
Experts warn, however, that Infineon’s commitment is far from enough to make Europe more independent of overseas producers across the board. “30 additional chip factories would be needed in Europe just for those areas where there are supply bottlenecks,” warns Ondrej Burkacky, semiconductor specialist at the consulting firm McKinsey.
For years, companies in Europe have been trembling about the supply of the chips that are vital for their survival from factories in the Far East. The components are no longer as scarce as they were at the peak of the pandemic. But individual chip types are still difficult to obtain – “and that will remain so in the long term,” says Jan-Hinnerk Mohr from the consulting firm BCG. But that’s not all: “Due to the rapidly increasing number of semiconductors in many products, the demand for chips in Europe is also growing,” predicts Mohr.
A year ago, the President of the EU Commission, Ursula von der Leyen, set an ambitious goal: Europe’s share of global chip production should more than double by 2030 to 20 percent. To do this, however, significantly more investors would have to be found.
In America in particular, huge factories are being built that are much more expensive and larger than the new Infineon plant. The Taiwanese contract manufacturer TSMC alone spends more than 40 billion dollars on a location in Arizona. World market leader Samsung and the global number two, Intel, are also investing heavily there.
America, South Korea and Japan have advanced
After all, in the middle of the month, after more than a year of debate, the EU cleared the way for the Chips Act, the largest support program for the industry of all time. The EU states are now allowed to support the manufacturers with a total of more than 40 billion euros. McKinsey expert Burkacky: “It’s important to have regulatory clarity, because other countries and regions have long been making steam.” The USA, South Korea and Japan have been luring billions in subsidies for months.
Meanwhile, Infineon is also making use of public aid in Saxony. The Bavarians are expected to collect one billion euros for their factory. 1000 new jobs will be created there. In purely mathematical terms, Infineon receives one million euros for each position. Industry experts believe that this is money well spent.
“Especially with power semiconductors, the manufacturing technology is extremely important. So if large factories for these chips are built in Europe, that strengthens the location enormously,” says BCG consultant Mohr. One of the reasons why power semiconductors, such as those produced by Infineon in Dresden, are in great demand in Europe is that car manufacturers need them for their electric vehicles and the components play an important role in renewable energies.
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That is not all. New jobs will also be created on a large scale in the vicinity of the new plant. “Probably 5,000 employees will be added at suppliers,” says Roland Giesen, head of Fabmatics. The medium-sized company from Dresden has concentrated on automation solutions in semiconductor plants. The entrepreneur has already hired eight employees in order to be able to tackle the expected orders from Infineon at an early stage.
Dresden is seen as a prime example of how Europe could catch up in chips. In addition to Infineon, Bosch and Globalfoundries have settled there with state support over the past three decades. There are also dozens of suppliers. “The chip industry usually thrives in clusters – and Dresden is now the leader in Europe,” says Burkacky from McKinsey.
A chip center like Dresden has a self-reinforcing effect. This is noticeable, for example, in the workforce. “Such a location is attractive for them, not least because they have good opportunities to change jobs.”
Infineon expects sales to increase by a third
The numbers speak for themselves: “Every third chip that is produced in Europe comes from Silicon Saxony,” says Raik Brettschneider, Managing Director of Infineon in Dresden. The company employs around 3,250 people in the metropolis. “Here we have excellent access to specialists,” emphasizes the manager. The new plant is scheduled to go into operation in 2026 and generate additional sales of five billion euros a year. This corresponds to a good third of the revenues from the past financial year.
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Another chip cluster next to Dresden could be created in Magdeburg, where Intel wants to build two large factories for around 20 billion euros. However, CEO Pat Gelsinger has been haggling with the state for funding for more than a year. In addition, the US group Wolfspeed decided at the beginning of the year to build a factory for power-saving chips made of silicon carbide in Saarland.
Politicians are aware that the factories of Infineon and Wolfspeed will not solve Europe’s chip supply problems. For months, the EU, the federal government and the Free State of Saxony have been trying to attract TSMC – so far without success. The German car manufacturers in particular could stock up on chips from the Taiwanese.
Just don’t lose interest in the chips
In Saxony, the state government is hoping that interest in chips in Brussels and Berlin will not disappear again and that the subsidies will be granted on a permanent basis. “If we don’t keep at it, we will lose touch,” warns Oliver Schenk, head of the Dresden State Chancellery.
The economist speaks from experience. After reunification, the federal government very benevolently promoted the settlement of chip companies in Dresden. In 2009, the state refused the ailing memory chip manufacturer Qimonda comparatively small grants in the tens of millions – the company went bankrupt, the modern Dresden factory stood still for a long time, today Infineon also produces there.
South Korea’s government was not so stingy and generously helped its domestic competitor Hynix at the time: The country now dominates the memory chip business.
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