Broadcom Stocks Drop 1% as the US Chipmaker Scraps $1B Investment in Spain’s Microchip Plant

American chip manufacturer Broadcom has scrapped the Spain microchip plant deal, Reuters reported. The giant chip maker canceled the deal after talks with the Spanish government collapsed. Cancellation of the Spain investment deal caused Broadcom stocks to drop 1% on July 14. 

A Major Setback

Broadcom is one of the major players in the US semiconductor industry. The company announced plans to invest in Spain’s microchip plant two years ago. At the time, Broadcom did not reveal the investment value. However, the Spanish government said the project could cost $1 billion, and would feature ‘large-scale back-end semiconductors facilities unique in Europe’. 

These facilities would have focused on the final chip assembly and testing phase. Spain promoted the chip plant under its Strategic Project for Economic Recovery and Transformation (PERTE Chip). The project was expected to strengthen Europe’s position in the microchip industry. 

Cancellation of the Broadcom Spain deal will be a major setback for Europe’s chip industry. Spain had been positioning itself to become a major player in the region. Previously, the Spanish government had committed to allocating over $14 billion to the microchip and semiconductor industry. These funds were to be raised from the European Union’s pandemic relief kitty. 

Effects of Trump’s Chip Policy

Talks between Broadcom and the government of Spain stalled last year. But the return of President Donald Trump to the White House appears to have pushed the negotiations to the breaking point. The Spanish press attributed the collapse of the talks to inaction on the part of the government. 

Broadcom’s concerns with regard to President Trump’s stand against US chip companies investing overseas also contributed to the collapse of the talks. Media reports further claimed that the US President obstructed Broadcom’s investment in Spain along with “another joint-venture with another American company, which was also going to make chips in Spain.”

Besides discouraging overseas chip investments, the threat of Trump’s 30% tariffs on imports from the EU starting August 1 further complicated the issue. If implemented, these tariffs could deteriorate the relationship between the EU and the US and significantly reduce trade between the two regions. Broadcom could also be struggling with the forceful approach that the EU is taking towards US tech companies as it implements the  EU AI Act and the Digital Markets Act. 

Going Against the Grain

Broadcom’s move to suspend investments in Spain highlights a growing trend among top chipmakers. In recent months, several chip manufacturers have scaled back on their European investment plans. For instance, Intel postponed plans to set up a chip factory in Germany. At the same time, Wolfspeed also ended expansion plans with German automotive supplier, ZF Friedrichshafen AG.

But, even with these setbacks, European countries are attracting investments from Asian chip giants. Foxconn plans to make significant investments in France through multiple joint ventures. Its investment in the country will largely focus on advanced semiconductor packaging and testing. 

Taiwan Semiconductor Manufacturing Company (TSMC) also plans to launch a chip design center in Munich, Germany. The company has also partnered with Infineon, Bosch, and NXP to establish an $11 billion chip manufacturing plant in Dresden, Germany. 

Broadcom is expected to leverage its microchip investment to grow revenues from its business in Europe. Currently, earnings from the region trail other parts of the world. Despite the share plunge, Wall Street remains optimistic about the chipmaker’s potential. Broadcom’s decision to halt the investment in Spain reflects the growing operational and geopolitical risks facing tech giants in the dynamic chip industry.