Are German state aids for Intel and TSMC in jeopardy?

Misha Lu, DIGITIMES Asia, Taipei 0

Credit: Bloomberg

Latest ruling from Germany's constitutional court might have jeopardized the country's semiconductor subsidies policy, with the aids planned for Intel and TSMC hanging by a thread.

The Karlsruhe-based court has decided on November 15 to strike down off-budget funding for climate action, calling into question the future of up to EUR770 billion worth of special funding avaliable for the German government, as reported by Bloomberg, citing people familiar with the matter. According to the court, repurposing EUR60 billion of pandemic aid from 2021 to finance the government's Climate and Transformation Fund (KTF) contravened Germany's constitution, known as the Basic Law. The decision has raised the fear in Berlin that similar funding vehicles may have to be dissolved by the end of the year.

A total of EUR870 billion of funds have been accumulated by the 29 special funds (Sondervermögen) operating outside of the country's annual budget. Apart from a constitutionally enshrined EUR100 billion fund dedicated to Germany's military, the remaining EUR770 billion might face an existential crisis as the coalition government's lawyers begin to digest the court rulings.

Back in August, Berlin planned to draw EUR20 billion from the KTF to finance semiconductor fab construction plans undertaken by the likes of Intel, TSMC, and GlobalFoundies. EUR10 billion was earmarked for Intel's project in Magdeburg, while TSMC's Dresden fab would receive EUR5 billion in state aid. It remains to be seen how the court decision would impact Germany's semiconductor policies, especially as German finance minister Christian Lindner has been vocal against tax increases while social spending cuts are opposed by the Greens and Social Democrats. New borrowing, meanwhile, is no longer an option as the debt brake was just re-instated.

A German think tank member familiar with German semiconductor policy previously told DIGITIMES Asia that the KTF is currently the "go-to" solution of Germany's coalition government to fix budget issues, even though it's already overbooked.