Semiconductor Industry Benefits from Subsidy Distribution by the US, Japan, and Others

To Attract Global Company Factories,
Over $100 Billion Spent,
Semiconductor Companies Negotiate Subsidies with Government,
Some View No Effect on Market Share Expansion

Major countries such as the United States and Japan are reaping significant benefits in the semiconductor industry as they compete to gain an edge in technological competition and reduce dependence on overseas supply chains by rapidly offering subsidies.

On the 19th (local time), Bloomberg reported that the United States, the European Union, Japan, and India have provided subsidies totaling more than $100 billion (approximately 129.16 trillion KRW) to attract global semiconductor companies' factories.

[Image source=Yonhap News]

As the subsidy competition among major countries intensifies to dominate the semiconductor industry, companies are taking advantage of this to expand production facilities in various countries. Intel recently decided to invest $25 billion and $4.6 billion in semiconductor factories in Israel and Poland, respectively. Israel will provide subsidies equivalent to 12.8% of Intel's investment under its Capital Investment Encouragement Act.

Additionally, Intel will invest $32.8 billion in a semiconductor factory to be built in Germany. The German government is supporting Intel with subsidies worth 10 billion euros (approximately 14 trillion KRW). After negotiations with the German government, Intel decided to double its initially announced investment amount. Consequently, the German government's subsidies also increased significantly from the original 6.8 billion euros.

Semiconductor companies have even begun negotiating subsidies with governments. Bloomberg reported that Taiwan's TSMC, the world's largest semiconductor foundry, is in a tug-of-war with the German government over establishing a factory in Dresden, Germany. TSMC proposed that the German government support 50% of the factory construction costs, similar to the level of support from the Japanese government. TSMC is currently building a semiconductor site of 210,000 square meters and a semiconductor factory equivalent to 4.5 Tokyo Domes in Kumamoto Prefecture, Japan. The Japanese government has decided to provide a remarkable subsidy of 476 billion yen, which is 40% of the total project cost of 1.1 trillion yen (approximately 10.6 trillion KRW).

TSMC

The reason major countries are striving to attract companies by dangling subsidies is to secure a domestic-centered semiconductor supply chain. With the recent intensification of geopolitical competition between the U.S. and China, countries such as Europe and Japan are working to reduce supply chain dependence on specific countries to mitigate risk factors.

However, experts predict that no country will benefit from the subsidy competition. Even if semiconductor factories are attracted domestically, it will not significantly change the global semiconductor market landscape. Jan Peter-Kleinhans, a semiconductor expert at the German think tank SNV, forecasted, "The share of cutting-edge manufacturing capabilities will not change significantly from a geographical perspective."

There are also concerns that excessive subsidy distribution could cause inflation in the respective countries. Morris Chang, the founder of TSMC, warned, "Even if countries invest to build domestic semiconductor supply chains, they may not achieve semiconductor self-sufficiency," and cautioned that this could instead raise prices and provoke backlash from taxpayers suffering under high inflation and high interest rates.

This content was produced with the assistance of AI translation services.