By By Jillian Deutsch, Debby Wu and Jenny Leonard<\/strong>

Magdeburg in former East Germany is famous for its towering gothic cathedral, and not a lot else. It’s now about to play a key role in U.S. and European efforts to tilt the global balance of power.

Intel Corp<\/a>. unveiled plans on March 15 to build a giant, 17 billion-euro ($18.7 billion) factory making cutting-edge semiconductors<\/a> in the city, adding to new plants in Arizona and Ohio the company announced over the past six months.

They are part of Chief Executive Officer Pat Gelsinger<\/a>’s plan to wrest control of production from Asia and tackle the global shortage of chips<\/a> exacerbated during the Covid-19 pandemic and exposed again following Russia’s invasion of Ukraine. “The situation reinforces why we’re doing this project, and the need for globally resilient and balanced supply chain,” Gelsinger said after revealing the Magdeburg site.

His ambition is one that the U.S. and European Union are promising to back with a combined $100 billion in a subsidy race to reduce reliance on imports just as China plans to turn itself into a chip powerhouse. Behind closed doors, though, some people in the industry are getting increasingly concerned that the push to make the West more competitive might backfire.

Their worry is not only that the money will be too little, too late, but the political strings attached to the aid may complicate global supply chains further. Different parts of the planet will compete to secure supplies while championing domestic plants that can’t yet fill the void.

The dearth of semiconductors has brought some car manufacturing to a halt and delayed shipments of game consoles and smartphones, waking Washington and Brussels up to the fact that their continents are dependent on a handful of regions for the key parts. The most notable is Taiwan, a geopolitical hotspot because of historically tense relations with China and one whose vulnerability is under more scrutiny since Russia’s invasion of its smaller neighbor.

Yet, however dysfunctional it may look at the moment, the supply chain is global and fully integrated. Unpicking it could carry greater risks, said Rudi De Winter, CEO of German chip maker X-Fab Silicon Foundries<\/a>.

The semiconductor industry “is a very global business, and it has done well being a global business,” he said. “This whole trend of trying to make things sovereign in every region and having its own supply chain is rather driven by politics and not by the semiconductor industry.”

Russia, which has been sanctioned by the U.S. and Europe, now is a clear example of how semiconductors have become increasingly important political tools. The items were some of the first goods that Washington and Brussels targeted to cut Russia off from the global economy, and they’ve continually threatened more action. Manufacturing of cars in Russia, for example, has already been hit.

On the flip side, Russia and Ukraine export palladium and neon used to make semiconductors, though chipmakers have downplayed the potential impact.

U.S. Secretary of Commerce Gina Raimondo said in an interview on March 9 that if Chinese companies defy U.S. restrictions against exporting to Russia, Washington could shut down companies by cutting them off from the American equipment and software they need.

Semiconductors and other high-tech are becoming “weaponized” with the current trade wars and supply chain issues, said Rafael Laguna de la Vera, CEO of SPRIN-D, Germany’s federal agency for disruptive innovation. “This is why regions need to invest into high tech to get resilient,” he said.

By By Jillian Deutsch, Debby Wu and Jenny Leonard<\/strong>

Magdeburg in former East Germany is famous for its towering gothic cathedral, and not a lot else. It’s now about to play a key role in U.S. and European efforts to tilt the global balance of power.

Intel Corp<\/a>. unveiled plans on March 15 to build a giant, 17 billion-euro ($18.7 billion) factory making cutting-edge semiconductors<\/a> in the city, adding to new plants in Arizona and Ohio the company announced over the past six months.

They are part of Chief Executive Officer Pat Gelsinger<\/a>’s plan to wrest control of production from Asia and tackle the global shortage of chips<\/a> exacerbated during the Covid-19 pandemic and exposed again following Russia’s invasion of Ukraine. “The situation reinforces why we’re doing this project, and the need for globally resilient and balanced supply chain,” Gelsinger said after revealing the Magdeburg site.

His ambition is one that the U.S. and European Union are promising to back with a combined $100 billion in a subsidy race to reduce reliance on imports just as China plans to turn itself into a chip powerhouse. Behind closed doors, though, some people in the industry are getting increasingly concerned that the push to make the West more competitive might backfire.

Their worry is not only that the money will be too little, too late, but the political strings attached to the aid may complicate global supply chains further. Different parts of the planet will compete to secure supplies while championing domestic plants that can’t yet fill the void.

The dearth of semiconductors has brought some car manufacturing to a halt and delayed shipments of game consoles and smartphones, waking Washington and Brussels up to the fact that their continents are dependent on a handful of regions for the key parts. The most notable is Taiwan, a geopolitical hotspot because of historically tense relations with China and one whose vulnerability is under more scrutiny since Russia’s invasion of its smaller neighbor.

Yet, however dysfunctional it may look at the moment, the supply chain is global and fully integrated. Unpicking it could carry greater risks, said Rudi De Winter, CEO of German chip maker X-Fab Silicon Foundries<\/a>.

The semiconductor industry “is a very global business, and it has done well being a global business,” he said. “This whole trend of trying to make things sovereign in every region and having its own supply chain is rather driven by politics and not by the semiconductor industry.”

Russia, which has been sanctioned by the U.S. and Europe, now is a clear example of how semiconductors have become increasingly important political tools. The items were some of the first goods that Washington and Brussels targeted to cut Russia off from the global economy, and they’ve continually threatened more action. Manufacturing of cars in Russia, for example, has already been hit.

On the flip side, Russia and Ukraine export palladium and neon used to make semiconductors, though chipmakers have downplayed the potential impact.

U.S. Secretary of Commerce Gina Raimondo said in an interview on March 9 that if Chinese companies defy U.S. restrictions against exporting to Russia, Washington could shut down companies by cutting them off from the American equipment and software they need.

Semiconductors and other high-tech are becoming “weaponized” with the current trade wars and supply chain issues, said Rafael Laguna de la Vera, CEO of SPRIN-D, Germany’s federal agency for disruptive innovation. “This is why regions need to invest into high tech to get resilient,” he said.