3.1.2 Case B
The investment and the incentives
The second case is quite similar to Case A as it also concerns an EU-based multinational company
with activities in the semiconductor industry and production facilities in several locations, both within
the EU and third countries. The subject of this case is also an investment within the past decade in
a production facility (semiconductor fab) but in another Asian country.
The total cost of the investment was several hundred million Euros and the incentives received from
the Asian host country consisted of a combination of
• Subsidies (grants) for R&D and training
• Tax incentives
• Free lease of the land with an option for expansion
Decisive factors for the choice of location
The location of the semiconductor fab was not given in advance, and the company was open to
locating the facility where it could get the best conditions. Both Europe, the US and Asia were
considered as possible locations and the company employed an investment consultancy to
investigate which kinds of incentives were available in different locations. At that time, the best
location package was provided by the Asian country.
Other factors that influenced the final investment decision in a positive way were the availability of
an efficient “ecosystem” of suppliers and other supporting functions for the fab, as well as the
efficiency and speed of the decision-making process concerning the provision of the location
package on the part of the host country. The company experienced the negotiation process as very
fast and decisive; it was completed in less than three months through the local investment
promotion agency.
Conclusions – case B
This case provides another clear example of the type market distortion within the area of KETs
investments that this study is concerned with. The choice of investment location was primarily
influenced by the availability of an attractive location package combining direct subsidies (grants),
tax exemptions and free land. In addition, the speed of the negotiations concerning the location
package was a significant positive factor along with the existence of a well-developed industrial
infrastructure. Similarly to the first case, this one underlines the issues that the companies
associate with the current set-up of the European state aid system which is seen as limiting both
the scale of the investment incentives that can be offered and the possibilities to reach a quick
decision. The EU system could not match the conditions that are offered by, particularly, Asian
nations eager to bolster their economic development through the attraction of hi-tech production
from abroad.