Magdeburg in the race for chips: crisis, opportunities and political risks!

Magdeburg in the race for chips: crisis, opportunities and political risks!

In an age when microchips are essential to most devices such as cars, washing machines and smartphones, the call for increased semiconductor production in Europe is louder than ever. However, the high-tech park in Magdeburg, which aims to strengthen the chip industry in this country, is faced with challenges. In this context, Marco Langhof, President of the employers' association in Saxony-Anhalt, highlights the problems in packaging semiconductors, which, according to him, is very labor-intensive. “A lot of semiconductors are currently being shipped to China without coming back,” he complains. However, this dependence entails not only economic but also political risks, as Langhof warns. His skepticism also relates to the often tough negotiations between the purchasing departments of large corporations, which do not always promote diversification of supply chains.

Saxony-Anhalt's Economics Minister Sven Schulze sees the European economy as facing major challenges. “The costs of infrastructure and production in Europe are higher than in many other regions, and this has a direct impact on prices for consumers,” he points out. This fact is particularly clear when you consider that only a small part of global chip production currently takes place in the EU. This dependence on foreign production locations is an issue that has become more explosive since the pandemic.

The geopolitical framework conditions

The geopolitical climate has taken a turn in recent years that is significantly impacting the global semiconductor market. The corona pandemic has already led to drastic delivery interruptions. Taiwan, South Korea, China and Japan account for a majority of global semiconductor production, with Taiwan accounting for 63% of global foundry capacity in 2020. Geopolitical tensions between China, Taiwan and the US are exacerbating fears of further disruption, forcing companies to take measures to secure their supply chains, such as warehousing and diversification. “Political support is necessary to survive in international competition,” adds Langhof.

To address this challenge, the EU launched the EU Chips Act in September 2023. The aim is to mobilize investment in the semiconductor industry and increase production capacity to 20% of the global market by 2030. In Germany, 20 billion euros in funding are already planned for the semiconductor industry. This compares to the US, which offers $39 billion in subsidies for new manufacturing facilities. But despite these efforts, the willingness to invest in Europe remains limited due to unfavorable conditions, as Schulze points out.

Outlook and opportunities

The Magdeburg High-Tech Park has the potential to become an important location for chip production in Europe, which both Economics Ministers Schulze and Langhof have clearly confirmed. The location could help to increase innovative strength in microelectronics and thus ensure not only regional but also European competitiveness. “The questions as to whether we will learn from the crises that the last few years have shown us and whether companies are prepared to diversify their supply chains are looming,” Langhof points out.

Overall, it will be important to make both political and economic decisions that will ensure that Europe not only has a say in global semiconductor production, but also has a strong influence. The coming years will be crucial in laying solid foundations for an independent and more resilient chip industry that can meet the challenges of the future. The promising approach of the Magdeburg High-Tech Park is a step in the right direction, but also an indication that there is still a lot to do.