Infineon to open 5 billion euro chip fab as part of EU sovereignty push

[BERLIN] Infineon Technologies is preparing to open its largest single investment, a five-billion-euro (S$7.4 billion) semiconductor factory, built with the help of European Union subsidies.

This comes as the bloc seeks to boost chip production.

The power chip fab, which is an extension of the German company’s Dresden campus, will open on Jul 2, chief operating officer Alexander Gorski said in the week of Jun 8 at the site.

The project is a major recipient of EU Chips Act funds and received about one billion euros in subsidies. 

The new plant represents a rare success for the bloc’s flagship semiconductor law, which was drawn up during Covid-era hardware shortages with the goal of doubling the EU’s share of chip production to 20 per cent by 2030.

However, the act has fallen short of its ambitions and key projects, such as a cutting-edge fab operated by Intel in the German city of Magdeburg, were called off despite generous subsidies. 

Brussels has drafted a new version of the act this year in a fresh attempt to bolster investment in the sector.

The effort is a pillar of the EU’s technology sovereignty strategy, a plan to reduce the continent’s dependencies on Chinese and US technologies.

This is done by investing in local champions and favouring EU-made tech products, such as chips or cloud services, over foreign alternatives.

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Infineon, traditionally a chipmaker for the automotive industry, has increasingly benefited from soaring demand for power chips used in artificial intelligence data centres, which will be produced at the new facility.

“The AI data centres currently being built and planned around the world will consume twice as much electricity in 2030 as they do today,” Gorski said. “That’s as much as the entire Federal Republic of Germany.”

Chip production at the Dresden fab will be scaled over time depending on demand, potentially adding as much as five billion euros in revenue per year, Gorski said, declining to comment on when full capacity will be reached.

The company has invested around two billion euros on construction, and the remaining amount will be spent over time to add more machines to the fab, he added.

The new facility is “a key catalyst”, Bank of America analysts including Didier Scemama wrote in a note in the week of Jun 1.

Demand from AI customers is materially above Infineon’s current capacity, the analysts noted, adding that the imbalance could improve in the 2027 and 2028 financial years.

The analysts raised their AI power revenue forecast for the company by 500 million euros to 4.5 billion euros for 2028.

Infineon expects data centre-related revenue to rise from around 1.5 billion euros in fiscal 2026 – roughly 10 per cent of sales – to 2.5 billion euros in 2027, it said in May. 

Infineon shares rose 2.6 per cent on Thursday (Jun 11) to 77.06 euros, and have more than doubled this year.

The hundreds of billions of dollars being invested in AI are driving the rapid expansion of data centre capabilities around the world.

Infineon does not produce advanced AI chips, like those designed by Nvidia, but the power semiconductors it plans to produce in Dresden are still needed for AI infrastructure.

As the spending boom lifts the fortunes of companies even tangentially linked to AI, some investors fear a bubble while others clamour to get a piece of the action.

Elon Musk’s SpaceX – which includes xAI, its satellite business and the X social network – is preparing for a record initial public offering on Jun 12 that would value the company at about US$1.8 trillion.

OpenAI and Anthropic, two leading generative AI startups, are also preparing to list. However, some planned data centre projects have failed to materialise.

“Investments in building AI data centres are real investments,” Gorski said. Major tech companies are investing more than US$700 billion in such projects this year, and Infineon is “seeing very strong growth here”, he added. BLOOMBERG