Recently, a report by the British "Financial Times" indicated that Infineon is contemplating shifting more manufacturing capacity to the United States in order to seize market opportunities brought forth by the US "Inflation Reduction Act."
Peter Wawer, Director of Infineon's Environmental Technology Division, responded to the company's strategic change by stating that they are currently reviewing the Act's requirements related to the value of goods made in the United States. He emphasized, "We need to ensure that we comply with these rules and requirements. We don't want to be excluded from critical business because we don't have a certain value share in the United States."
Image source Infineon official website
The impact of the US "Inflation Reduction Act" on the global industrial chain is indeed evident. Launched in August 2022, the Act encompasses numerous measures, including generous subsidies to promote the production and implementation of electric vehicles and other green technologies in the United States. However, it has been met with strong opposition from European countries, alleging that the bill will force their companies to invest in the United States and potentially hollow out European manufacturing.
While European countries have expressed concern and dissatisfaction with the bill, the United States seems to exclude Europe from the list of so-called "countries or regions for trade agreements." Consequently, a growing number of European companies have accelerated their deployment in regions outside Europe.
The core objective of the "Inflation Reduction Act" is to address shortcomings in the US' new energy industry. Over time, the United States suffered from the hollowing out of its industry, prompting the acceleration of manufacturing's return through state subsidies, trade barriers, and trading the market for technology.
However, the "Inflation Reduction Act" has successfully attracted numerous companies to move relevant production capacity or production lines to the United States, particularly European firms. As a result, Infineon benefits considerably from the energy transition, particularly the shift to electric vehicles, which require more chips than internal combustion engine vehicles.
With the introduction of the United States' "Inflation Reduction Act," companies within the industrial chain, including Infineon, will inevitably evaluate its incentives. The European Commission announced the "Net Zero Industry Act" in March, aimed at countering the pressure put on European industries by the United States' "Inflation Reduction Act." In the future, the global industrial subsidy war will likely intensify.
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