Germany’s 200 billion euro (US$193.81 billion) energy aid package is expected to provide only limited relief for businesses, and is unlikely to dissuade companies that are already looking to relocate to cheaper manufacturing bases overseas.
The German government set out its energy relief package last month, including a gas price brake and a cut in fuel sales tax to help households and small and medium-sized businesses (SMEs) cope with surging prices.
“The proposed energy relief package will not change anything on the agenda for the time being. We still have to find alternatives,” said Mads Ryder, chief executive of Bavaria-based porcelain manufacturer Rosenthal GmbH.
Photo: Reuters
The company, established in Germany 143 years ago, has been looking to relocate some of its production out of Germany to cut costs, and Ryder said the gas brake plan was still too vague to convince Rosenthal to reconsider its plans.
The German government this week is due to unveil details of the gas brake and other aspects of the relief package, which is due to run until spring 2024.
High labor and other costs in Germany have been driving many companies to relocate parts or all of their business to cheaper locations in emerging European economies and elsewhere, or to think about doing so.
Lars Feld, an economic adviser to German Minister of Finance Christian Lindner, said the energy crisis was bringing those sorts of decisions to a head.
“Industry, thinking of moving, is now going to wait to see how the energy price brake works. It is an important psychological boost, but we will not be able to return to energy prices as they were before the [Ukraine] war,” Feld said.
As manufacturers in Germany face energy bills of up to 10 times more than what they paid two years ago, one in five engineering firms saw the risk of relocating at least some of their business overseas, a survey by German union IG Metall showed last month.
High energy prices helped drive up consumer inflation in Germany to 10.9 percent last month, the highest level in more than a quarter of a century, which in turn is putting upward pressure on wages, adding to labor costs.
Industry bodies initially welcomed the energy relief package, which also includes a temporary electricity price brake to subsidize basic consumption for consumers and SMEs, and some companies are optimistic.
Textiles manufacturer Wuelfing GmbH & Co KG said it would shelve plans to move production to Portugal or Pakistan from Germany if the government caps energy prices at levels that are only twice as high as in 2020.
“It will help, but we don’t yet know exactly what to expect,” Wuelfing managing director Johannes Dowe said.
The German Association for Small and Medium-sized Enterprises said it saw no concrete indications of increased outsourcing of production abroad, as the energy price crisis is affecting all European countries.
“The situation is different for expansion plans, which are currently being examined,” association executive director Marc Tenbieg said.
A study by Deutsche Bank saw production in Germany shrinking by 2.5 percent this year and by 5 percent next year due to rising energy prices.
“If we look back at the current energy crisis in about 10 years, we could see this time as the starting point for accelerated deindustrialization in Germany,” the study said.
Germany’s large industrial companies can move production elsewhere depending on cost and customers, but for small and medium-sized firms, the backbone of German industry, the crisis is likely to hit harder.
“For German SMEs ... adapting to a new energy world will be a major challenge that some companies will fail at,” the study said.
Automotive parts supplier Boegra Technologie GmbH, which is based near Duesseldorf, reduced production last month due to rising energy prices. The company, which has already outsourced some production to the Czech Republic, is now looking for an alternative to Germany.
“I am traveling to the Czech Republic next week to examine the possibilities of expanding our business there,” Boegra managing director Tobias Linser said.
KEEPING UP: The acquisition of a cleanroom in Taiwan would enable Micron to increase production in a market where demand continues to outpace supply, a Micron official said Micron Technology Inc has signed a letter of intent to buy a fabrication site in Taiwan from Powerchip Semiconductor Manufacturing Corp (力積電) for US$1.8 billion to expand its production of memory chips. Micron would take control of the P5 site in Miaoli County’s Tongluo Township (銅鑼) and plans to ramp up DRAM production in phases after the transaction closes in the second quarter, the company said in a statement on Saturday. The acquisition includes an existing 12 inch fab cleanroom of 27,871m2 and would further position Micron to address growing global demand for memory solutions, the company said. Micron expects the transaction to
Nvidia Corp’s GB300 platform is expected to account for 70 to 80 percent of global artificial intelligence (AI) server rack shipments this year, while adoption of its next-generation Vera Rubin 200 platform is to gradually gain momentum after the third quarter of the year, TrendForce Corp (集邦科技) said. Servers based on Nvidia’s GB300 chips entered mass production last quarter and they are expected to become the mainstay models for Taiwanese server manufacturers this year, Trendforce analyst Frank Kung (龔明德) said in an interview. This year is expected to be a breakout year for AI servers based on a variety of chips, as
Global semiconductor stocks advanced yesterday, as comments by Nvidia Corp chief executive officer Jensen Huang (黃仁勳) at Davos, Switzerland, helped reinforce investor enthusiasm for artificial intelligence (AI). Samsung Electronics Co gained as much as 5 percent to an all-time high, helping drive South Korea’s benchmark KOSPI above 5,000 for the first time. That came after the Philadelphia Semiconductor Index rose more than 3 percent to a fresh record on Wednesday, with a boost from Nvidia. The gains came amid broad risk-on trade after US President Donald Trump withdrew his threat of tariffs on some European nations over backing for Greenland. Huang further
HSBC Bank Taiwan Ltd (匯豐台灣商銀) and the Taiwan High Prosecutors Office recently signed a memorandum of understanding (MOU) to enhance cooperation on the suspicious transaction analysis mechanism. This landmark agreement makes HSBC the first foreign bank in Taiwan to establish such a partnership with the High Prosecutors Office, underscoring its commitment to active anti-fraud initiatives, financial inclusion, and the “Treating Customers Fairly” principle. Through this deep public-private collaboration, both parties aim to co-create a secure financial ecosystem via early warning detection and precise fraud prevention technologies. At the signing ceremony, HSBC Taiwan CEO and head of banking Adam Chen (陳志堅)
RSS