Broadcom Abandons Spain Chip Factory, Shifts Focus to Asia

Broadcom, a leading U.S. semiconductor company, has officially abandoned its plans to build a microchip factory in Spain. This decision marks a significant setback for the European Union's efforts to bolster its domestic semiconductor capabilities. The project, announced in July 2023, aimed to construct a $10 billion advanced semiconductor backend packaging and testing facility. This facility was intended to be a "unique large-scale backend semiconductor facility in Europe" and was set to receive substantial support from the EU's post-COVID recovery fund, with a €120 billion subsidy earmarked for the semiconductor industry's development.

The breakdown in negotiations was attributed to several key factors. Firstly, Broadcom demanded that the Spanish government pre-pay several billion dollars in equipment procurement subsidies, while the Spanish government insisted on a phased payment approach tied to project milestones. Secondly, the environmental impact assessment for the proposed site in the Catalan industrial zone was estimated to take up to 18 months, far exceeding Broadcom's internal investment recovery model assumptions. Additionally, the 2024 Spanish general election led to a change in the Minister of Industry, with the new Minister, Oscar Lopez, failing to engage in substantive negotiations with Broadcom. The "America First" policy implemented by the Trump administration further complicated the situation, ultimately leading to the termination of the cooperation.

In response to the cancellation of the Spanish project, Broadcom has swiftly initiated plans to supplement its Asian production capacity. The company plans to invest an additional $500 million to $700 million in its existing packaging bases in Malaysia and Vietnam. This investment will focus on expanding the production of 2.5D packaging and Chiplet technology, aiming to offset the gap left by the cancellation of the European project.

This strategic adjustment aligns with Broadcom's overall transformation direction. Through the acquisition of software companies like VMware, Broadcom is transitioning from a traditional semiconductor manufacturer to a comprehensive technology solutions provider. In the first quarter of the 2025 fiscal year, its AI business revenue reached $41 billion, a year-on-year increase of 77%. This shift reflects Broadcom's commitment to diversifying its revenue streams and enhancing its competitive edge in the rapidly evolving technology landscape.