Germany to Bolster Chip Sector After Scuppering Siltronic Sale

(Bloomberg) -- Germany is planning to bolster its semiconductor industry after the government thwarted the takeover of a local supplier, raising questions about the country's technology strategy.

Chancellor Olaf Scholz's administration is working on programs to invest in the chip sector, which the government considers central to Germany's energy shift, according to a government official.

With the approval process in its final days, Economy Minister Robert Habeck met with European Commission President Ursula von der Leyen in Brussels last week to ensure that plans to invest billions of euros in cleaner technologies would pass state-aid scrutiny, said the official, who asked not to be identified because the discussions are private.

Germany's new government derailed GlobalWafers Co.'s $5 billion takeover of Munich-based Siltronic AG by allowing a Monday deadline to grant approval to lapse without a decision, despite reviewing the deal for more than a year.

There are signs the takeover process got caught up in geopolitics. Germany's Economy Ministry blamed China's late approval -- granted on Jan. 21 -- for its inability to reach a decision in time.

But the failed deal suits both countries. China, which issued an 80-page decision, undermines a Taiwanese company from becoming a bigger player in the semiconductor industry, while Germany wards off the risk of losing key technology.

Habeck, who also oversees energy and environmental policy, is pursuing a deeper overhaul of Europe's largest economy. Focused around a massive expansion of renewable energy, the former co-leader of the Green party is seeking to push the country away from old-school engineering.

It remains to be seen how Germany plans to boost its semiconductor sector. Representatives from Germany, Belgium, France, Italy and the Netherlands are worried that excessive government investment in chip production could lead to a subsidy race or even an overproduction of chips, according to people familiar with discussions among the countries.

Even before the new government took control in December, Germany had been tightening rules on foreign takeovers after a spate of Chinese efforts to buy local high-tech companies.

The number of foreign-investment reviews has almost quadrupled since 2018 to to 306 in 2021, according to Economy Ministry data. The government denied proposals only in two cases -- one was a Chinese takeover of Leifeld Metal Spinning AG.