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Infineon, the world’s largest supplier of silicon chips to the car industry, said it was considering moving more manufacturing across the Atlantic to comply with recently passed legislation that seeks to boost the US semiconductor industry.
Peter Wawer, head of Infineon’s green technology division, said the German chipmaker was reviewing requirements in the Inflation Reduction Act that relate to the value of goods manufactured in the US.
“We of course need to watch this, that we comply with these rules,” Wawer said, and “that we are not excluded from business due to a certain share of value that we do not have in the US”.
Wawer said the company was currently happy with its footprint in the US but added that in the future it “might need to transfer a certain amount of product, or certain additional manufacturing, into the US.”
The Munich-based company has seven manufacturing sites across the US and one in Mexico, largely thanks to acquisitions in the past decade such as the $3bn it paid for International Rectifier in 2015 and its $9bn takeover of rival Cypress Semiconductor in 2019.
President Biden’s $369bn package of subsidies and tax incentives has sparked concern among European policymakers as high-tech industries needed for the green transition eye opportunities across the Atlantic.
Germany too has devoted billions of euros in subsidies to encourage manufacturing at home after coronavirus pandemic-induced chip shortages hit its car industry hard and highlighted how essential the sector is.
Infineon benefited from demand that coincided with a pandemic-induced bottleneck in semiconductor production. The company last month broke ground on a plant in the eastern German city of Dresden, which it received €1bn in subsidies — roughly a fifth of the cost — to build.
Wawer said that the pandemic revealed how many industries were reliant on semiconductors, which mostly come out of Taiwan. “Now everybody is starting to think: ‘oops, what if something happens between China and Taiwan’. This of course accelerates this whole discussion.”
Infineon specialises in less advanced chips that, rather than being used in computationally powerful devices, are made for industries such as the automotive sector, which makes up 45 per cent of the company’s sales.
Even though car sales are slowing, Infineon is betting it will benefit from the transition to electric vehicles, which require more chips than those run by combustion engines.
Amit Harchandani, head of European technology research at Citi, said Infineon’s power-efficiency chips made it a “big beneficiary of the shift to renewables”.
“I would expect any company with exposure to the energy transition in particular to be evaluating the Inflation Reduction Act incentives,” he said.
Wawer’s green industrial power division last year made up only 13 per cent of Infineon’s €14.2bn in sales. But Wawer said the increase in green energy infrastructure such as wind turbines, solar panels, electric car chargers as well as transmission lines required to connect everything to the grid meant demand for chips had “simply exploded”.
The division expects annual revenue growth of more than 10 per cent “for the years to come”, Wawer said.
Infineon last year made 11 per cent of revenues in the US, compared with the 29 per cent that came from mainland China.
Additional reporting by Tim Bradshaw
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