Federal Ministry of Economics Rejects State Funds for Nexperia in Hamburg Due to Chinese Connections: The Nexperia Case and Germany’s China Policy

2023-06-09 11:57:00

Berlin The Federal Ministry of Economics of Robert Habeck (Greens) does not support the chip manufacturer Nexperia with its plant in Hamburg with state funds as originally planned. The ministry announced on Tuesday that the EU Commission had approved funding for 31 chip projects in Germany.

In December 2021, the ministry had submitted 32 projects. The project that is now missing is funding for Nexperia. Government circles confirmed this to the Handelsblatt – the Ministry of Economics itself had removed Nexperia from the list. There has never been a stop to funding in this way.

Nexperia, with 14,000 employees worldwide, produces most of its chips in Hamburg and has 1,600 employees there. The head office is in the Netherlands. However, the company belongs to the Chinese group Wingtech, which has connections to the Chinese state.

The case reflects the federal government’s realigned China policy, which Economics Minister Habeck is driving forward. The Handelsblatt reported on the skepticism in the Ministry of Economics for the first time in winter 2022.

The decision against the promotion of Nexperia was made at the highest level in the ministry, according to government circles. Large parts of the specialist level in the ministry had spoken out against a cancellation of the funding.

But Habeck and those around him thought it was a mistake to support a company that was ultimately backed by the Chinese. Especially when it comes to a key technology such as microchips: The funding would make a possible outflow of know-how towards the People’s Republic even more problematic.

Beware of military use of Nexperia chips

The decisive factor was the assessment that chips like those from Nexperia could also be used for military purposes. The intelligence services would have supported this assessment.

According to government officials, Nexperia has not yet received a negative decision. The ministry is trying to influence the company to withdraw its application for funding itself. Nexperia would still have the opportunity to appeal against the decision of the Ministry of Economic Affairs. The ministry and the company could not initially be reached for comment.

>>Read here: How the Nexperia case became an issue in the Federal Ministry of Economics

Specifically, it is about funding within the framework of the “Important Projects of Common European Interest”, or IPCEI for short. At the IPCEI, the EU Commission and member states define sectors of “common European interest” that are to be promoted. For this sector, in this case the microelectronics sector, the legal framework for state aid will then be relaxed.

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The 31 funding projects approved for Germany have a total volume of a good four billion euros. “In this way we can increase resilience throughout Europe in this important field and secure added value and jobs,” explained Habeck on Thursday in Berlin.

It is assumed that the supported German companies will make additional private investments in research and development, production facilities and buildings in the tens of billions. At the same time, the national projects would create more than 4,000 direct new jobs.

Funded companies will therefore include Infineon with locations in Bavaria, Saxony and North Rhine-Westphalia and Bosch with locations in Baden-Württemberg and Dresden. Habeck did not comment on Nexperia.

Nexperia is an expression of the global struggle for chip supremacy

The money should have helped the company to develop energy-saving chips for its plant in Hamburg-Lokstedt. They are intended to extend the range of e-cars and reduce the size of chargers for electronic items. The project was planned with several partners, including an institute from the Fraunhofer Association.

But after Nexperia ended up on the provisional funding list in December 2021, the federal government embarked on a new course in China. In the case of strategic goods such as chips in particular, Berlin is attempting to push back Chinese influence.

>>Read here: How Habeck’s skepticism about Nexperia grew

The People’s Republic, on the other hand, is attempting to take over the global semiconductor markets, orchestrated by the state. Berlin fears that in the event of a possible attack on Taiwan, China could use the chips for blackmail in order to keep the West from imposing sanctions.

At the same time, however, the Nexperia case is fueling the debate as to whether Germany’s new China policy is focusing too much on demarcation.

Sharp criticism of Habeck from the SPD and FDP

Even in the federal government, not everyone is behind Habeck’s course. In the case of Nexperia, it is once again the SPD that pushes through Habeck’s decision. Bernd Westphal, economic policy spokesman for the Social Democrats, told the Handelsblatt: “It cannot be that a federal ministry simply says for every connection to China: ‘We’ll stop all machines there.'” The behavior of the Ministry of Economics is “incomprehensible”.

Nexperia chips

Semiconductors are strategically important, especially for the German automotive industry.

(Foto: Imago Images)

According to information from the Handelsblatt, the SPD-led Chancellery was also involved in the Nexperia case. According to government circles, people there are also skeptical about Habeck’s request. However, the decision-making authority for funding applications lies solely with the Ministry of Economic Affairs. In addition, the Chancellery viewed the Nexperia case as bearable.

So far, Habeck has mostly known his other coalition partner at his side in China policy. But after the Nexperia decision, critical tones also come from the FDP.

Their economic policy spokesman Reinhard Houben demanded that the federal government first present its security and China strategy. “Otherwise, like now with Nexperia, we only have individual decisions that do not follow an overall concept.”

>>Read here: The federal government’s national security strategy on the home straight

Habeck, on the other hand, receives support from the opposition. “I think the decision is right,” said the economic policy spokeswoman for the CDU/CSU, Julia Klöckner, to the Handelsblatt. “We all know how the Chinese state deals with data, copyright and competition. We shouldn’t be promoting this with German tax money.”

Allegation against Nexperia: state influence from China

Nexperia belongs to the Chinese group Wingtech. According to the company, sales were last at 2.1 billion dollars. According to a study by the Dutch data analysis company Datenna, as of 2021 almost 30 percent of Wingtech’s shares were owned by state or state-related investors. The connections of the shareholders also lead to the “Commission for the Supervision and Management of State-Owned Assets of the State Council”. The conglomerate reports directly to the Chinese State Council.

>>Read here: German companies are delivering less and less to China

Nexperia defended itself against allegations of government interference. The co-owners mentioned are passive shareholders. Wingtech and Nexperia would not be affected in any way.

On the other hand, Habeck is not alone in his skepticism. In mid-November, the British government subsequently banned the takeover of the country’s largest chip factory by Nexperia.

More: Chip manufacturer Nexperia complains about the federal government: “Do you want to actively discriminate against us?”

First publication: 08.06.2023, 2:54 p.m.

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