Broadcom cancels plans for Spanish chip factory, EU chip localization strategy encounters setbacks
Broadcom has canceled its plan to build a semiconductor factory in Spain, marking a setback for the EU's semiconductor localization strategy. The project was originally set to receive €12 billion in subsidies, aimed at enhancing Broadcom's supply chain advantages in the AI and networking chip sectors. Reasons for the breakdown in negotiations include the method of subsidy payment, lengthy environmental assessment approval processes, and government changes due to the Spanish elections. Broadcom will turn to Asia, planning to invest an additional $500 million to $700 million in Malaysia and Vietnam to make up for the losses
According to informed sources, American chip giant Broadcom (AVGO.US) has officially canceled its plans to invest in and build a microchip factory in Spain. This decision marks a significant setback for the EU's strategy to promote domestic semiconductor capacity expansion and reflects the profound impact of geopolitical changes on multinational technology investments.
The project dates back to July 2023, when then Spanish Minister of Digital Transformation José Luis Escrivá announced that Broadcom planned to build a $1 billion advanced semiconductor backend packaging and testing factory in Spain. According to information disclosed by the Spanish government, the facility was positioned as "a unique large backend semiconductor facility in Europe," with plans to allocate €12 billion in special subsidies from the EU's COVID-19 recovery fund to support the development of the semiconductor industry.
Broadcom CEO Hock Tan stated at the time that this move would strengthen the company's supply chain advantages in AI accelerators and networking chips, with its Tomahawk 6 Ethernet switch chip already utilizing TSMC's 3-nanometer process to support million-level GPU data center interconnections.
The core contradictions that led to the breakdown of negotiations centered on three factors: first, Broadcom requested that the Spanish government provide several hundred million dollars in equipment procurement subsidies upfront, while Madrid insisted on phased payments based on project progress; second, the environmental assessment approval period for the factory candidate site in the Catalonia industrial zone was estimated by the local government to take up to 18 months, far exceeding Broadcom's internal investment recovery model assumptions; more critically, the 2024 Spanish elections resulted in a change in the Minister of Industry position, and the new minister, Oscar López, did not engage in any substantive negotiations with Broadcom after taking office. Coupled with the "America First" policy implemented by the Trump administration in the U.S., this ultimately led to the formal termination of cooperation between the two parties.
It is noteworthy that Broadcom has quickly initiated an Asian capacity supplement plan. According to the company's second-quarter financial report, it will invest an additional $500 million to $700 million in its existing packaging bases in Malaysia and Vietnam, expanding capacity for 2.5D packaging and Chiplet technology to fill the gap left by the cancellation of the European project.
This strategic adjustment aligns with the company's overall transformation direction—by acquiring software companies like VMware, Broadcom is transitioning from a traditional semiconductor manufacturer to a comprehensive technology solutions provider, with its AI business revenue reaching $4.1 billion in the first quarter of fiscal year 2025, a year-on-year increase of 77%
