Saxon semiconductor ecosystem provides strong business growth effects

Saxony, Germany, benefits greatly from the dynamic investment activities taking place in the Saxon microelectronics industry. The growth of the semiconductor ecosystem is going to contribute significantly to the continuous positive economic development of the business location in the years to come, bringing greater added value and, consequently, a considerable increase in the gross domestic product, growth in exports, and additional jobs.

This is the result of the study “National and regional economic growth effects of the semiconductor ecosystem in Saxony” conducted by the Institute for Innovation and Technology (IIT) from Berlin, on behalf of Saxony Trade & Invest Corp. (STI).

Martin Dulig, Saxon State Minister for Economic Affairs and Chair of the Supervisory Board of STI, says: “Saxony is one of the top players in the European Champions League of the semiconductor industry. Thanks to the European Chips Act, among others, it was possible to bring the world’s largest contract semiconductor manufacturer TSMC to the Free State. Infineon is currently expanding their factory in Dresden, which constitutes the largest individual investment in their corporate history. Major projects like this one usually bring other investments, in particular by suppliers, strengthening Saxony as an industry and research location for decades to come. 

"With state-of-the-art semiconductors and semiconductor applications, numerous small and medium-sized Saxon enterprises will also benefit from this development and improve their competitive position. But you have to finish what you started. This means that the Federal State of Saxony needs to continue to improve the framework for a sustainable development of the semiconductor location. That is why the issues of land development, infrastructure services, and investment in the education and research environment are always on our mind and our political agenda in the Free State.”

“It is good and important that the previously assumed positive effects of the investment activities in the Saxon semiconductor ecosystem have now been substantiated by corresponding figures and models, on a national and regional economic level, for our business location. The study shows the potential and opportunities offered by the region. 

"This is a huge opportunity for investors, companies and suppliers of any kind, from materials and machinery to software and services. Considering this development, the Federal State of Saxony provides wide-ranging opportunities for the local economy and for international investors – be they from Germany, Europe, the U.S., or Asia. Becoming part of this special ecosystem is worth the effort. The study will play a key role in the work of STI in the future when it comes to procuring potential investors and international skilled labor in global competition, and supporting the players on site.

"The development opportunities anticipated for the microelectronics ecosystem after 2030 are highly interesting as well. Particularly noteworthy: Additional investments boost the innovative strength in the entire region, expanding existing collaborations and establishing new research projects and innovation programs.

"We expect significant impulses, e.g., in the field of energy and resource efficiency (“green” microelectronics), manufacturing excellence, and skills development, which will in turn improve the attractiveness of Saxony as a business location on the international level. Furthermore, the study surmises that the existing cluster of suppliers and service providers in the microelectronics
industry will further expand and diversify. This will benefit not only companies in the entire ICT sector, but research facilities and start-ups as well. These are important arguments for our settlement activities and the continuous development of STI’s sector work”, Thomas Horn, CEO of STI, explains.

Individual key topics:
Effects on value chain: Positive effect on GDP – Doubling of share in industrial production in Saxony
The regional economic effects are distributed differently during the construction and production phase. For example, Saxony is expected to see an increase in added value by an amount of EUR 1.6 billion during the construction phase in 2025 compared to the reference year 2023; during the subsequent production phase in 2030, the added value is expected to increase considerably by a total of EUR 12.6 billion compared to the reference scenario without the investment. 

With additional EUR 12.6 billion in added value in 2030, semiconductor / microelectronics industry will increase its share in the gross domestic product of Saxony by about 7 percent, and the share of the microelectronics industry in Saxony’s industrial production will almost double compared to today’s share.

Furthermore, Saxony strengthens its position as structure-building location for the European semiconductor manufacturing sector. Thanks to the presence of important companies, and a highly capable research environment, Dresden/Saxony is not only the largest semiconductor location in Europe, but a groundbreaking business location as well. In addition, all of this boosts Saxony’s overall competitive position compared to the other federal states.

Jobs: 24,200 new jobs, not only in the semiconductor industry, by the end of 2030
With the current and planned investments, about 5,500 new and qualified direct jobs will be created at the semiconductor companies esmc, Infineon, GlobalFoundries, Bosch, X-FA, and Jenoptik when production starts. These 5,500 jobs created directly in the semiconductor industry will entail another 9,900 indirect and induced jobs; i.e., a total of 15,400 jobs will be created immediately upon commencement of the production in 2026/27. 

By the end of the decade, the number of jobs resulting from the expansion of the semiconductor location, Saxony will increase to 24,200 direct, indirect and induced jobs, with the induced effects also creating jobs outside of the semiconductor industry.

Looking further into the 2030s, the current investment activities of the semiconductor companies alone are expected to create a total of about 30,000 additional jobs (direct, indirect and induced) in Saxony.

Growing prosperity: Higher salaries and attractive revenue opportunities
The effect of the semiconductor industry is already reflected in the income structure. While the gross monthly salary (median) in East Germany, which amounts to EUR 3,157, is almost EUR 600 lower than the salary in West Germany, where it amounts to EUR 3,752, the gross monthly salary in the semiconductor industry (East and West) amounts to EUR 4,545. The income in the semiconductor industry is thus, significantly higher than the average income.

Furthermore, the positive – both direct and indirect – effects of the investments will lead to an increase in the work volume and, consequently, the amount of the wages. The employees have a higher income at their disposal, allowing them to further boost the added value and the development of the level of prosperity in the Federal State of Saxony in general.

A necessity: Recruitment of international skilled labor and workers
These potentials for Saxony as a business location can only be realized if we are able to recruit the necessary skilled labor, taking into account the anticipated demographic aging and decrease of the working population in particular. The regional supply being limited, of course, we need an influx of labor which, considering the global nature of semiconductor industry, must necessarily include more than Germany, i.e., all of Europe and other regions of the world as well.

Export growth: Export business is becoming more important
The industry in Saxony is already closely interconnected with the rest of the world in economic terms. Exports are expected to become even more important for the economic development in Saxony in the future. Under the conditions presented here, the export ratio (share of exports in the gross domestic product) will likely increase to about 36% by 2035 (2023: approximately 32%).

Outlook and mission
The development of Saxony as a location for the semiconductor industry until 2030 and beyond promises a wide variety of opportunities resulting from the ecosystem’s history of success and diversity, also in cooperation with startups and other industries, technologies, and companies.

If innovation – in particular in the field of systems in packaging (back-end of chip manufacturing), which has always required a lot of personnel – makes it possible to achieve a similar degree of automation as in semiconductor production itself (front-end), such a facility could conceivably also be established in a high-wage country such as Germany. 

The fact that Saxony is a strong location for mechanical engineering and automation technology constitutes an advantage for the local/regional semiconductor industry. Chip design could be another positive issue for the future, both within the framework of the development of new semiconductor products in cooperation with various industries that use them, and in regard to the production of innovative chips for artificial intelligence.