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High-tech industry: how the east attracts investors

Status: 06/14/2022 08:23

Whether it’s Tesla, Intel or battery maker CATL, East Germany attracts major international investments like no other region in the country. What makes it so attractive in the competition for locations?

Von Sebastian Mantei, MDR

“We’re rolling out the red carpet for Intel – and that’s a good thing.” What Magdeburg city councilor Falko Grube (SPD) announced in early June when voting on the development plan for the Intel site roughly reflects the mood in many East German states. People want to profit from the high tech boom at all costs. In return, communities sometimes make big concessions and focus on the future.

Whether it’s Tesla in Grünheide in Brandenburg, battery manufacturer CATL in Thuringia or Avnet and Intel in Saxony-Anhalt, these deals are a top priority for state governments and constantly receive new requests from around the world. Saxony, which achieved nothing when Intel established itself, can also look forward to more investments.

Short transport routes as an advantage

Corona and the war in Ukraine may have promoted this development, but they are not the only factors responsible for this renewed recovery. Because the decisive factor for settlements are short and safe transport routes within Europe. Saxony, Thuringia and Saxony-Anhalt in particular benefit from the Leipzig-Halle airport, the hub of air transport. Furthermore, the new high-tech regions are very well connected in terms of transport by motorways and waterways.

At the same time, the new settlements are an opportunity to offer people in the East a prospect of promising and well-paid jobs following the phase-out of coal, says Economy Minister of Saxony-Anhalt Sven Schulze (CDU ). Car suppliers in central German states also have to break new ground as the internal combustion engine is phased out.

In the field of electric mobility, investments such as the CATL battery plant near Erfurt are just in time. Europe’s largest battery cell factory is expected to start production in late summer 2022. Chinese company CATL has chosen Thuringia despite high wage, energy and tax costs. Thuringian Economy Minister Wolfgang Tiefensee (SPD) cites the central location in the center of Germany and Europe as a location advantage, where car manufacturers and R&D locations are nearby.

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This is also underlined by the head of Intel Germany Christin Eisenschmid. He would like the Intel Magdeburg factory to collaborate with nearby universities, the Max Planck Institute and the Fraunhofer Institute to promote research and, above all, to attract specialists. And all the new high-tech locations in the east can take advantage of it, because the shortage of skilled labor is one of the biggest challenges.

Instead of working against each other, the venues should create a closer network in the future, asks Oliver Holtemöller of the Leibniz Institute for Economic Research in Halle. East Germany needs to tap into the momentum and see itself as an economic area. The region can only remain attractive to potential investors in the future if it is closed.

A big plus is the undeveloped, large and contiguous areas that exist only in East Germany. The new industrial parks offer room for growth. Electronic service provider Avnet, which is building a high-performance distribution center in Bernburg in Saxony-Anhalt, also appreciates it. Its clients include Intel and Infineon.

A lot of water is needed

According to Roswitha Heiland, Avnet’s head of logistics, the company cannot expand to either locations in Belgium or Bavaria. Bernburg offers this opportunity, which the company is using. At the same time, the manager praises the commitment of the city, which provides all the support for the conciliation process being approved. This is the experience of many investors in the East.

But even if the billion-dollar deals are implemented without much resistance, there is a problem. Semiconductor manufacturing requires large amounts of water. This is especially rare in the East. Industry and politics want to ensure that sustainable methods of treating water for reuse are developed. So far, however, these are only declarations of intent for which there are no concrete implementation plans.

Hopes for the east’s high-tech future are high, but how long will the huge demand last? “The market is hot right now, and that’s good,” says Slobodan Puljarevic, head of Germany at Avnet. At the same time, however, he also indicates that the market is very volatile. “It can change relatively quickly,” the manager said. But predictions so far show that investors are counting on growth and hoping for a golden age in East Germany.

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