Will the Dutch consortium ChipNL get its desired €150 million in subsidies?

Large investments needed to ensure fair competition and closer ties

Will the Dutch consortium ChipNL get its desired €150 million in subsidies?

The newly formed Dutch government under PM Dick Schoof has only just been installed. However, the chip sector is knocking on the door for subsidies already. After ASML managed to ensure billions in investments in its local Eindhoven region, shortly thereafter other semiconductor players started asking for the same treatment. Now, a broader front of 30 companies has taken shape under the collective name of ChipNL, which includes ASML, NXP, Nexperia, Philips and several start-ups.

The companies jointly wrote a letter to the new cabinet to explain their required subsidies. Specifically, the ChipNL consortium wants the government to pledge 100 to 150 million euros in investments over the next six years. In turn, the consortium will set aside 100 to 200 million euros per annum, the Dutch national news organization NOS reports. The money is intended to further the cooperation between the various semiconductor companies.

“A lovely hot shower”

Núria Barceló Peiró, Program Manager at NXP, signals that the investments are necessary to ensure fair competition. According to her, the Dutch government must contribute financially, because, ominously, it would be “very easy” to expand abroad otherwise. ASM CFO Paul Verhagen emphasizes the international competition underlying the demand for investment. “In countries where we operate, we’re getting a wonderful treatment. We are enticed to invest there. And if that happens to a lesser extent or not at all in the Netherlands, there is of course a greater chance that some of that growth will go abroad.”

All in all, the letter is not a threat, Verhagen argues, but rather a “positive warning.” Several media outlets rightly question the cabinet’s reading of the letter. In any case, the targeting of investments seems tactically chosen. Now that it’s clear that the new cabinet wants to curb immigration (including the influx of expats), the demands focus specifically on equal opportunities for every chip company. Moreover, given that the companies in question are often far from being competitors to each other but complementary, this is a demand that may help all parties going forward.

Should support not be forthcoming, it is to be expected that the chip companies in question will seek growth elsewhere. A complete departure from the Netherlands is not realistic for companies like ASML, Philips or NXP, but expansion in other areas such as the U.S. or Taiwan is.

Netherlands or elsewhere

In fact, the letter is an expression of a new reality. As was suggested by Verhagen, France, Germany and above all the United States are trying to create an attractive business climate that may lure some Dutch outfits away. Sometimes that includes a promise from the US CHIPS Act or its European equivalent, but that is certainly not a requirement. The question of “support” can be interpreted broadly, at any rate: tax benefits, housing, opportunity for growth, attracting talent, et cetera. But ChipNL’s objective takes this one step further and asks the Dutch government to put its money where its mouth is: does it really want to be and remain the hub of the chip industry in Europe? Is the strategic and economic relevance of this sector important enough to warrant continued financial support? Should the previous administration under PM Mark Rutte have harboured hopes that it would have removed a burden from its successor(s), nothing could be further from the truth.

If the Netherlands wants another clearer example of how substantial this kind of government support can be: the chip sector in South Korea can expect a converted 430 billion(!) euros from its government. True, this amount is spread over two decades, but even then the demands from ChipNL are a pittance by comparison. This is because the Korean government intends to assure itself of being able to supply at least 10 percent of global chip production. The Dutch chip companies in question, the most successful of which focus on chip manufacturing machinery, have fundamentally different requirements to their Korean counterparts, and instead focus more on personnel and the surrounding infrastructure than building fab capacity. The Dutch government can count itself lucky that it’s dealing with a smaller price tag than chip ambitions elsewhere require. Whether the brand new Schoof administration recognizes the good deal it faces, remains to be seen.

Also read: Future of Dutch chip industry triumphs thanks to AI revolution