It was planned to finance the construction of TSMC and Intel chip production facilities in Germany with funds from both the European Union and Germany, in addition to the companies’ own funds, and local authorities in certain regions of the country were ready to provide additional tax benefits. Germany’s budget crisis calls into question the ability of the country’s authorities to keep their promises.
Publication of WirtschaftsWoche to which reference is made Reuters, called the recent decision of the German Federal Constitutional Court a source of potential problems for Intel and other companies that rely on the support of German authorities to implement projects in the country. Saxony’s Economics Minister Sven Schulze stated in general that the economic damage to Germany was incredibly great and the damage to its reputation was simply gigantic.
We are talking about the recent decision of the German Constitutional Court, which declared illegal the redistribution of funds between extra-budgetary funds that were supposed to become a source of financing for projects of foreign companies. TSMC expected around 5 billion euros to build its factory in Germany; the funding for Intel was twice as high. Together with other projects, 20 billion euros were collected to be borrowed from the Climate and Transformation Fund, and the country’s authorities wanted to replenish them with unused funds from the trust fund to combat the consequences of COVID-19. The corresponding transfer of funds between funds even took place in 2022, but a court ruling declared such actions illegal.
As explained Tom’s Hardware with reference to the German edition ComputerBaseSuch a court ruling led to difficulties in the adoption of the draft budget for 2024 by German parliamentarians. The Bundestag will not receive the draft budget for adoption next week as originally planned, so it will not be signed until the end of this year. If German authorities have to revise the structure and size of the budget while cutting or eliminating subsidies for chipmakers, this could lead to Intel and TSMC abandoning their projects in Germany. The management of both companies has previously made it clear that the availability of subsidies to build businesses outside of their traditional locations of concentration (US and Taiwan, respectively) is a crucial factor in the viability of such investments.