Insights into Europe’s Biggest Economy 3 / 22

DIVERSIFYINGDEUTSCHLAND

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Disruption in a variety of areas is leading
Germany to seek new solutions and new partners.

G

GERMANYPhoto: Illing & Vossbeck Fotografie

FOCUS

ENERGYSECURITY IS
TOP OF THE
AGENDAThe national government isaccelerating investment into
domestic renewables andhydrogen technology
as Germany seeks secureenergy supplies for now –and the future.

»Diversifying supply
and value chains is thewatchword in Germany
in late 2022.«

pages 4–11

CLIMATE PROTECTIONTECHNOLOGY

Dear Reader,

Cleantech Cleans Up

Making Microchips

The market for climate technology in Germany
is set to double in a decade.

Semiconductor manufacturers are choosing
Germany as a production location.

page 14page 22

LOCATION

MORE ARTICLES IN THIS ISSUE:

Region on the Rise

Future Hydrogen Clusters: Germany is investing heavily in H2 technology .................. page 12

Germany's east is attracting unprecedented
foreign direct investment.
page 18

In Brief: Smart glass, lithium research and astroll down Germany's "Silicon Allee"....... page 16
Carsten Schneider Interview: Insights fromthe commissioner for eastern Germany.... page 20
Decarbonizing Data: Germany's booming dataindustry is going green .......................... page 28____ The Digital Magazine
Online at:Online Incorporation: Founding a business inGermany has gotten easier..................... page 30

www.marketsgermany.com

Solving a Plastics Problem: A Japanese–German merger success story ...................... page 32

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Editor: Jefferson Chase
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Cover: K ammann Rossi/
MultipictureThis issue of Markets Germany is very much about
eggs and baskets, and why you shouldn’t put all of
the former into one of the latter. That’s the lessonof the past two years for Germany and many otherplaces around the world – from the corona shock
to supply chain bottlenecks to the turmoil caused
by Russia’s war on Ukraine.
Rule number one for private investors is that portfolios should be diverse, and diversifying supply
and value chains is the watchword in Germany inlate 2022. This is happening for energy, raw materials and essential components like microchips.
So does that mean Europe’s largest economy isturning away from globalization? Not at all.
Firstly, if anything, Germany’s drive to diversify
is making it more global, as politicians and businesspeople look for new partners around the globe.
As I write these words, Germany’s chancellor andeconomics minister are visiting Canada. Their
mission? To deepen trade and business relations
with that vast nation, which is a trusted friend andally and possesses huge supplies of raw materials.
Secondly, even when production is “reshored” – orwhen it is moved to Germany, as is increasingly thecase with semiconductors and batteries – the country doesn’t exist in a hermetically sealed national
bubble. International companies like Intel andNorthvolt think that this is a great time to expand
to and within Germany, and the same opportunities
exist for SMEs from almost anywhere in the world.
In that spirit, as you peruse these pages I hope you
will find some ideas that will help you diversify
your business.
Dr. Robert Hermann, CEO
Email: invest@gtai.com

ultimate.ai/press

REETU KAINULAINEN, CEO AND CO-FOUNDER OF ULTIMATE
Reetu Kainulainen laid the foundation for
the virtual agent platform Ultimate at a
hackathon in Helsinki in 2016. Fresh out of
university, he saw the customer support staff
at the event struggling, created a demo fora support chatbot and won first place. This
led to Kainulainen cofounding Ultimate,pioneering a multilingual AI in Finnish, an
extremely complex language. Industry-leading brands like Finnair naturally became aclient due to Ultimate’s linguistic capabilities. At the same time, Ultimate attracted
the attention of German software giant SAP
and moved to Berlin through SAP’s Techstars
accelerator program. Ultimate soon secured
its first ever German customer, Zalando, andnow has brands like Gorillas and Trade Re-

public as customers. It continues to build on
its momentum, investing massively in R&D,
creating an inclusive team with 40 percent
women, and promoting sustainable growth.
“Ultimate is rooted in technological innovation and cutting-edge research. Finland
fostered these underlying values, and we thenneeded a bigger arena to tap into our fullpotential. Moving to Berlin, with its booming tech scene and fiercely ambitious talentpool, opened massive opportunities for us
as a company,” Kainulainen says. “Today,
we’re scaling customer support worldwide:
We have a product that’s lightyears ahead ofold-school chatbots, and we have global hubs
in the US, UK and Finland, and a brilliant
team with over 40 nationalities.”

Quick facts
NAME

Reetu Kainulainen

JOB TITLECEONATIONALITY

FinlandQUALIFICATION 	Master of Science in Tech-

nology, Information andKnowledge Management

COMPANY NAME

Ultimate

LINK

www.ultimate.ai

LOCATION

BerlinINDUSTRY irtual agent platformV
working in 109 languages

BERLIN OFFICE

Community, sales,
operations, product andengineering

4

MARKETS GERMANY | Focus

DIVERSIFYINGDEUTSCHLANDFirst corona, then the war against Ukraine have underscored the need to avoid
one-sided dependencies. Politicians and businesses are placing a new emphasis on
diversification – for energy, raw materials, supply and value chains, and more.

In 2021, as many of the world’s leadingindustrial nations learned to cope withthe coronavirus and restrictions associated with the pandemic were eased or lifted,
many experts predicted a swift, V-shaped economic bounceback to 2019 levels. Alas, things
would not be that easy. Disruptions in supply
and value chains have hindered recovery andgrowth. Eighty percent of German companies
have reported difficulties of this kind, according to German business think tank ifo. Nowhere
has the problem been more apparent than in
microchip bottlenecks.
Those difficulties have lent momentum toEurope as a location for semiconductor production (see page 22), as businesses on thecontinent have seen the value in diversifying
suppliers and ensuring that key components

are produced where they're actually used. As
the geographical heart of the continent, Germany is at the center of this change in orientation,
as exemplified by the EUR 17 billion microchip
mega-fab facility Intel is building in the cityof Magdeburg.
In February 2022, Russia invaded
Ukraine, causing horrific casualties, suffering and further disruption to the global
economy, perhaps most prominently in theareas of energy and raw materials. Germany,
which until recently sourced a comparatively
large share of its imported energy from Russia, came under particular pressure.
The government’s reaction in the last few
months has been swift and decisive. Almost
overnight, diversification in the interest ofenergy security has been added to decarbon-

ization as a main thrust of German policy,
with the country formulating strategies toreduce and ultimately break its dependence
on Russian natural gas, oil and coal. These
have encompassed everything from floating
LNG (liquefied natural gas) terminals andhydrogen to solar and wind farms. Withinweeks, the German energy economy wasrepositioned and is now headed in new, farmore diverse directions (see page 12).
All this change will not come without
sacrifice. At the same time, it will also bring
unprecedented opportunities for innovative
businesses to help shape a Germany better
equipped to deal with whatever further challenges the future may hold. New players are
finding new opportunities in the heart ofEurope, as the following pages will illustrate.

Banking on renewables:
Firms like Denmark's Ørsted andBritain's Octopus Energy aresupplying Germany with green
energy.

ENERGY SECURITY
To ensure greater energy independence, Germany is investing heavily inwind power, importing liquefied natural gas from Canada and elsewhere,
and building a hydrogen economy.

Accelerating green goals:
Germany has increased its 2030
target for offshore wind from 20 GW
to 30 GW (from 7.7 GW today). Also
solar energy will see expansion ratesof 22 GW per year. By 2030, there
will be around 215 GW solar
capacity installed.

Photo: Multipicture Kammann Rossi
Sources: Ørsted; Ørsted; Octopus Energy

Rethinking supply chains:
Companies in Germany arefinding new sources for components like microchips.

6

MARKETS GERMANY | Focus

MAKINGA VIRTUE
OF NECESSITY
Germany’s transition to clean energy has been on the political
agenda for years, but geopolitical developments have given it
an unprecedented urgency. For businesses, this means a flurryof new opportunities, supported by lots of state funding andprivate investment.

T

he war in Ukraine and the accompanying sanctions against Russia havebeen a wake-up call, making politicaland economic decision-makers painfully awareof how dependent the country has been not
only on Russia and its oil and gas supplies but
also on other critical raw materials, components and goods from other continents.
Sustainability has now taken on a double
meaning. “Clean energy and secure energy
sources are now understood as two sides ofthe same coin much more than they were before,” says Thomas Grigoleit, director of energy,building and environmental technologies at
the German government’s international business promotion agency GTAI. “These developments have created a whole new dynamic.
While it’s true that Germany already had ambitious goals in place for the transition to clean
energy and the decarbonization of industry,
government action to accelerate these efforts
is now proceeding at an unprecedented pace.”“It’s clear that we need to speed up thistransformation dramatically and that thisrequires massive investments along the entire value chain in the energy sector and incleantech industries,” Grigoleit adds. Short-,
medium- and long-term goals have been compressed, and diversification is the new order ofthe day, as the issue of natural gas illustrates
most vividly.

At the start of February, Germany imported
some 55 percent of its natural gas from Russia.
With the Nord Stream 2 pipeline between thetwo countries set to go operational, there waslittle sign of anything changing in that relationship. But on February 24, Russia launched
its invasion of Ukraine. Almost overnight,
there was an enormous new imperative tohalt imports of Russian gas. Nord Stream 2
was summarily put on ice, and gas supplies
for everything from industrial applications tohome heating suddenly looked insecure. The
search for alternatives was on.
Those alternatives included buying morenatural gas from other exporting countries suchas Norway and, of course, simply using the gas
Germany does import more efficiently. By theend of the summer, before Russia suspendeddeliveries, Germany had reduced the proportion of imported Russian gas to just 9 percent.

THE BOTTOM LINE
Germany is investing heavily
now to diversify its supplies ofenergy and raw materials in the
future. This opens up chances
for new players in its new sustainable energy economy.

Special "suction
bucket jacket" foundations are installedat Ørsted's Borkum
Riffgrund wind farmin the North Sea.

“Thanks to the intensive efforts of all those
involved, we have succeeded in further diversifying supply chains and gradually but
significantly reducing our dependence,” theGerman Ministry for Economic Affairs andClimate Action (BMWK) wrote in its “Third
Progress Report on Energy Security” on July
20. But there was no way those initial efforts
alone could fill the remaining gap. Therefore,
the government turned its attention to LNG(liquefied natural gas).
Facilities to accommodate six “floating
LNG terminals” on massive ships are being
created in record time in four locations:
Wilhelmshaven, Brunsbüttel and Stade on
or near the North Sea, and Lubmin on theBaltic Sea. The ships are being rented frominternational companies like Höegh LNG and
Dynagas. In addition to five state-sponsored
floating storage and regasification units (FSRUs), as the terminals are technically known,

MARKETS GERMANY | Focus

4
THINGS THE GERMAN­GOVERNMENT IS DOING TO
SECURE A GREEN FUTURE

1

Subsidized energy efficiency
The state-owned KfW bank and the Federal
Office for Economic Affairs and Export Control both offer financial assistance for energy-efficient building renovation and construction projects. The measures have beengrouped into the Bundesförderung für effiziente Gebäude (Federal Funding for Efficient
Buildings), or BEG for short.

Photo: Ørsted/Press

2

Carbon dioxide pricing
The price charged for the emission of carbon
dioxide (CO2) from heating with oil or gas will
gradually increase from EUR 30 to EUR 55 per
ton in 2025. This price is paid by both building owners and their tenants. The measure
is intended to motivate property owners torenovate their buildings, making them moreenergy-efficient.

3
a private consortium is also setting up its own
facility in Lubmin.
“We have to build up new infrastructure
to replace Russian gas as quickly as possible,”said German Minister for Economic Affairs
and Climate Action Robert Habeck. “So it’svery good news that a private regasification
ship is joining the government vessels.” Theplan is to have the first of the FSRUs go operational by the end of 2022, with the rest
following within 12 months.
LNG a major stopgap
But that's not the end of the story. Belgian
investment group AtlasInvest, which specializes in the energy sector, is building an LNG
terminal in Wilhelmshaven together with its
German subsidiary Tree Energy Solutions(TES). “The German government asked us
to integrate an LNG terminal in our plannedhydrogen production facility to reduce de-pendency on Russian imports as quickly
as possible,” TES Chief Commercial Officer
Otto Waterlander told business newspaper
Handelsblatt.
In May, the import terminal was includedin the list of “prioritized projects” promoted by an LNG acceleration law. Construction work could thus begin straightaway.
According to the company, the application
procedure took just under a month during
the project phase – far less than is the norm
for infrastructure projects.
At least 7.5 billion cubic meters of liquefied gas will be processed here per year, whichcorresponds to 8.5 percent of the current German gas demand. “We are of course delighted
that the German government has chosen us
as a stationary terminal under this new LNG
law,” says Paul van Poecke, cofounder anddirector of TES. “It shows the vital role our
project will play in ensuring the security ofHydrogen R&D
Companies getting started with green hydrogen technologies can access numerous
support options at regional, national and European Union levels. The German government
is supporting the flagship projects “H2Giga,”“H2Mare” and “TransHyDE“ with EUR 700
million.

4

Climate protection agreements“Climate protection agreements” are being
introduced as a new funding instrument.
Investment decisions are now necessary forenergy-intensive sectors such as the steel
and chemical industries. To provide companies with incentives, the state plans to coveradditional costs for more climate-friendly
production methods until they pay for themselves.

Sources: Handelsblatt; KfW; DIHK; BMWK; Tagesschau

78

MARKETS GERMANY | Focus»The political goals offer a very
high level of long-term investment
security for companies in the energy and environmental sectors.«
Thomas Grigoleit, director of energy, building and environmental technologies, GTAI Berlingas supply, and in the long term, accelerating the energy transition and the import ofnon-fossil gas.”
From LNG to H2
In the medium to long term, however, neither Habeck nor his ministry are great fansof LNG, which is non-sustainable. The ultimate answer to Germany’s needs, they argue,
will be renewably generated electricity andhydrogen (H2) as an energy carrier (see our
Future Hydrogen Clusters article, page 12),and even the short-term LNG projects havebeen conceived with that in mind.
The AtlasInvest facility in Wilhelms­
haven can be easily converted into a hydrogen terminal. The plan is reportedly to havesupertankers from the Middle East delivergreen energy carriers in the not too distantfuture. “Technically, it makes no difference
to us,” explained Waterlander. “We can use
the same terminal either for landing LNG
made from natural gas or green gas produced
from hydrogen.”“Because of the design and scale of the
project,” wrote Forbes magazine, “it has thepotential to replace the Nord Stream 1 or 2
pipeline in terms of energy supply.”“Examples like these show that even in
the current process of rapidly reconfiguring
energy infrastructure in the short term, action
is being taken to ensure that long-term plans
are also achieved,” says GTAI expert Grigoleit.
Targeting 80 percent renewables
A major component of the drive to diversify
Germany’s energy supplies is thus the tran-

sition to clean energy itself – it’s the pace,
not the ultimate goal, that’s changed here.
In July, to stimulate investments in thisall-important and indeed all-encompassingarea, the German government adopted a comprehensive package of measures. A total of 20
new laws and ordinances are set to trigger amajor investment boost in renewables. “We
are tripling the speed of the expansion ofrenewable energy – on water, on land andon the rooftops,” Habeck said.
The core aim is to increase the share of
renewables in gross electricity consumption,
currently around 50 percent, to at least 80
percent by 2030. The level of ambition inGermany’s long-term, clean-energy goals isa major reason for international companies
to be interested in doing business at the heartof Europe.
“The current political goals of the national government offer a very high level oflong-term investment security for companies
in the energy and environmental sectors,”says Grigoleit. “This makes expansion to theGerman energy sector very attractive in the
short as well as the long term.”
Harnessing the windThis is also the view of Andrew Mack, managing director of Octopus Energy Germany, asubsidiary of the UK-based electricity and gas
supplier specializing in sustainable energy.
The company, which has so far mainly acted
as a green power distributor in Germany, inpartnership with electric car manufacturer
Tesla, among others, is currently investing
in its first wholly owned German wind farmand is thus becoming a local energy producer
itself. “The current investment will only be
the first of many,” Mack emphasizes.
He sees great potential in the German
energy market. Now is a very good time forcleantech investments in the country, he
explains.
“We have reached a turning point. The
government has now understood that renewables are not only the more climate-friendly
but also the cheaper alternative to fossil fuelsin the long run.”
Above all, the government’s decision to
set aside 2 percent of Germany’s land area forwind energy production and at the same time
to massively expedite planning procedures for
new projects, also in the offshore wind sector
and in the expansion of photovoltaic areas,is “exactly the push that the market needs
now,” Mack says. Previously, site development for the production of renewable energy
proceeded too slowly, was costly and fraught
with difficulties. “But I am very optimisticthat this is now changing.”
Octopus Energy Germany has big expansion plans. The company wants to reachone million customers and more than 1 GW
of installed capacity in Germany by 2024.
By 2030, it hopes to have 1,000 additional
employees in Germany. “Now is the time tothink big,” says Mack. “We want to fundamentally change the market, not just build
a few small wind farms here and there,” heexplains. “It is important in this market tobe big and to act on a large scale in orderto accelerate the energy transition to thenecessary speed.”MARKETS GERMANY | Focus

9

An onshore turbine built byOctopus Energy. In the past
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ion toitsnaits trJÖRG KUBITZA
Jörg Kubitza is the Danish energy company Ørsted's
country manager in Germany. He sees the German
government's plans for offshore expansion as along-term strategy for diversification: "We naturally welcome the increase in expansion targets andabsolutely support the political plans and intentionsof the German government and the Ministry for
Economic Affairs and Climate Action," he says. "It is
exactly the right signal that the expansion of offshore
wind power will enjoy priority over other forms ofutilization. This is an important step toward achieving
the climate targets. For us, Germany is a core market
in Europe and offers a good, existing logistics structure
and a value chain for offshore wind."

Offshore and onshore
The new dynamic in the wind energy market is also illustrated by a recent investmentby the Danish energy company Ørsted. The
company is building the Borkum Riffgrund
wind farm in the North Sea, 50 kilometers
off the German coast, with a total capacity of
913 megawatts delivered by 83 wind turbines.
This will make the wind farm the largest inGerman waters to date, capable of supplying
more than one million households with green
energy as early as 2024. It is the first largescale offshore project to be realized in a longtime – but only the first in a row of planned
new projects.
The political framework conditions forentrepreneurial activity on a grand scale
have never been better. This is true not only
in energy production but in many related
cleantech industries. “Security of supply has
now become more of a focus overall as an

economic policy goal: This applies not only
to energy raw materials but to the supply ofcritical raw materials and goods as a whole,”
explains Manfred Fischedick, scientific director of the German sustainability think tank
Wuppertal Institute.
The need for investment is enormous. “In
Germany, and also in the whole of Europe, wewill have to bring back industrial productionthat has been offshored,” Fischedick adds.
“Also, we will have to manage the conversion to a circular economy that can recycle
critical raw materials much more efficiently
than before.”
Just as Germany is reducing its dependence on Russian gas, it also wants to become
more independent in other areas in the coming years. “We see, for example, that we still
have strong dependencies on Chinese manufacturers and raw materials suppliers in theconstruction of solar plants,” says Fischedick.

So the time is also good to establish new solar production sites in Germany and Europe.
The technology is currently in the middle ofa generational shift, presenting an opportunity for Germany to place itself at the front of
the learning curve again in terms of researchand development (see our article on climate
protection tech, page 14).
The situation is similar in battery production and in the restructuring of basic andheavy industries for more climate-friendly
production. New electrolysis plants, factories
for the production and recycling of batteries and solar panels, more energy-efficientheating systems for industrial companies andsystems for the supply of hydrogen will allneed to be built to support the green industrial
revolution. “In the coming years and decades,
we will see huge investments to keep Germany
attractive and competitive as an industrial
location,” says Fischedick.

MARKETS GERMANY | Focus

THE HEATING REVOLUTION
About half the energy consumption in Germany is due to heating and cooling, and mostof it still comes from fossil fuels. To meet its climate goals and energy security needs,
Germany urgently needs a turnaround. The country has set a target of completely
switching to climate-neutral heat by 2045. With heating bills soaring, heat pumps are
currently all the rage: Viessmann, Vaillant and Bosch recorded record turnover in heatpumps in 2021, and all indications are that those revenue levels will be shattered in 2022.

Photo: Ørsted/Press

80 % 47%
OF GERMANY'S ELECTRICITY­SUPPLY MUST COME FROMRENEW­ABLES BY 2030.

OF ELECTRICITY IN GERMANY WAS
GENERATED FROM RENEWABLE
SOURCES IN Q1/2022.

593

2%

PAGES ARE CONTAINED IN THE"ACCELERATION PACKAGE" FORGERMAN ENERGY INDEPENDENCE.

OF LAND IN GERMANY IS TO BE
RESERVED FOR WIND ENERGY
PLANTS.

Source: BMWK
Sources: BMWK; Federal Statistical Office

MORE SOLAR, MORE WIND
There is a growing trend for companies to lookto supply their energy needs from 100 percent
renewables, preferably on site or at least locally.
And that could prove a competitive advantage
not just for firms already in Germany but forbusinesses who come to the country.
“It’s therefore now attractive for companies to settle in a location like Germany, whichis already very far advanced in terms of renewable energy in international comparison,”says sustainability expert Fischedick. “In early
2022, we had a monthly renewable power shareof almost 60 percent of the total supply. You
have to look a long time to find a renewables
share in supply that high in other countries.”
When it comes to establishing (or re-establishing) production capabilities, decision-makers in business and politics are being
careful not to allow any new dependencies toarise. “But this does not mean that international businesses are no longer welcome,” says

GTAI expert Grigoleit. “On the contrary, weneed much more speed now. We have to invest
in many places at the same time. International
businesses and partners are highly welcome.”
So Germany is, and will remain, a very
open economy, even if it now plans to reducesome of its dependencies on the global markets by increasing domestic energy capacity
and seeking new supply relationships.

Expansion paths for wind and photovoltaics inGermany (additions in GW)

20

15

22

CONTACTthomas.grigoleit@gtai.com
GTAI director of energy,building and environmental
technologies

10

18
13

5

7

9

0

2022

2023

2024

2025

Source: BMWK

2026

11

12

MARKETS GERMANY | Focus

GERMANY’S

Future Hydrogen Clusters
Germany’s accelerated transition to renewables has further underscored the importance ofgreen hydrogen, the carrier needed to exploit renewables to their fullest. A national strategy
is in place, but how is it being realized on the ground? The town of Leuna provides someanswers.

HIGH-GROWTH, ­HIGH-IMPACT ­INDUSTRY
Areas in Germany with growth potential for thehydrogen industry (in GWh)
More information:www.wasserstoffatlas.de

12,716

754

2,528

318

2.9

12
134
0.1

342

8.1
11

21
5

2.7

22

0.5

Source: ETR, “Wasserstoffpotenziale in den Regionen im Strukturwandel”

Photo: picture alliance/dpa/Martin Schutt

Continued research onhydrogen is vital for
Germany's transition
to clean energy andenergy security.

MARKETS GERMANY | Focus

13

THREE FACTS ABOUT H2:

There are big things afoot in Leuna,a town of just 15,000 inhabitants andpart of central Germany’s “chemical
triangle.” Ammonia has been processed there

since the 1900s and it’s one of the most important German locations for mineral oil. But soon
it may be better known for hydrogen.
The renowned Fraunhofer Society opened
a hydrogen lab in Leuna in 2021, where it has
since been testing various electrolyzers for the
production of hydrogen (H2) from renewableenergy. Gas and engineering multinational
Linde is a key partner in the project and buys
green H2. But it’s also building a massive
24-megawatt electrolyzer of its own. One of thelargest in the world, it will be able to produce
3,200 tons of green H2 annually – enough topower 600 fuel cell buses. “Hardly any othersite offers such a wide range of hydrogen-related plants and products,” explains Thierry
Rousson, head of product management Hydrogen & Syngas at Linde.
Leuna is a prime example of how traditional German industrial regions are adapting
to profit from the creation of a new hydrogen
economy. Economist Michael Bräuninger fromthe Economic Trends Research institute recently published a study that identified 135
regions with great hydrogen potential. “Especially in the lignite mining areas, which havelong provided cheap energy, hydrogen offers
great opportunities,” says Bräuninger.
Making the hydrogen transition
The researchers grouped the regions with thegreatest potential for H2 production into fourclusters: Northern Germany, North Rhine-Westphalia, Central Germany and Berlin-Brandenburg-Lausitz to the east. These areas will receive lots of state assistance to transition toH2. “Significant investment in production anddistribution infrastructure is needed to build
the hydrogen economy,” Bräuninger explains.
Jürgen Ude, state secretary for structuralchange and major investments in Saxony-Anhalt (the region Leuna is part of) describes green
H2 as “a true all-rounder” and points out that
Saxony-Anhalt, with its mining history, offers“ideal conditions” for nurturing an H2 energy economy. The fossil fuel industry alreadyproduces 3.6 billion cubic meters of conventional (grey) H2 per year, which is consumed

by regional companies. “The region already

135

Number of regions with highhydrogen potential in Germany
Source: Economic Trends Research

has large industrial production capacities forhydrogen, but it’s still mainly produced fromnatural gas,” says Ude.
Furthermore, a 157-kilometer-long H2 pipeline connects production sites and storage facilities, and an even longer pipeline linking to
the Baltic Sea and western Germany is underconstruction. When finished, this will form partof a “European backbone” for green hydrogen.
Different strokes

800

TWh

Potential demand for greenhydrogen in Germany by theyear 2050
Source: Fraunhofer ISI

10 GW
Planned hydrogen generation
capacity in Germany by theyear 2030
Source: BMWK

THE BOTTOM LINE
Germany has accelerated its
efforts to establish a ­hydrogen
economy in the interests of­energy security as well asclimate protection. This hascreated business opportunities
all over the country.

The various regions all offer specific advantages. Berlin-Brandenburg-Lausitz, for example,
benefits from the high demand for eco-friendly
heating and mobility concepts from the capitalcity, Berlin. Brandenburg, which is sparsely
populated, has also had ample land to build therequired infrastructure. By contrast, property
comes at a premium in highly populated North
Rhine-Westphalia, but there is huge industrial demand, great expertise, a highly qualified
workforce and a well-established industry.
Thus, the German government is pursuing different approaches to strengthen the
H2 potential of different places. “Individual
concepts must be customized for each region,”
Bräuninger says. Cooperation and knowledgetransfer is the key to success – the regions must
network with the important players in R&D andwith investors. “This way, they accelerate thetransfer of research into practice and maximize
the impact of their projects,” he adds.
In April, Minister for Economic Affairs
and Climate Action Robert Habeck pledged
to greatly expand green H2 supply chains. In
June, the funding program H2Global Foundation also invited tenders for various green
H2 derivatives – the national government isfunding it with EUR 900 million. The Atlas of
Hydrogen Networks in Germany also provides
invaluable advice and support for hydrogen
SMEs.

CONTACTraphael.goldstein@gtai.com
heiko.staubitz@gtai.com
GTAI experts for green hydrogen

MARKETS GERMANY | Climate Protection

CLIMATE ­PROTECTION»MADE IN GERMANY«
Germany’s high level of innovation, large domestic market and rapidly growing renewableenergy capacity are attracting international cleantech businesses. Solar parks, wind farms andhydrogen plants are popping up all over the country, accompanied by an electromobility boom.

Much of what needs to be done forGermany and Europe to reach
their energy goals is known, but
a lot still needs to be discovered. This is where
cleantech comes in. Take the Swedish company
Svea Solar, which recently expanded its operations across Europe, including to Cologne. It
connects its customers to a grid that is shared,
efficient and 100 percent renewable. “We are
exploding in our various markets, and we will
be growing 100 percent this year,” Erik Martinson, cofounder and CEO, told EME Outlook. “Inorder to make a positive impact on the climate
we need this growth, and alongside this, ensuring our positive customer experience andbringing in the most talented people in thespace are all paramount.”
Germany is a natural fit not only becauseof its huge market and eco-conscious society,but for its repository of scientific and research
excellence. This May, the Fraunhofer Institutefor Solar Energy Systems achieved a major
breakthrough, engineering a solar cell with arecord 47.6 percent efficiency. “In our research,
we aim to make concentrating photovoltaics
even more efficient and competitive, as we believe that this is the most sustainable form of
renewable electricity,” says head of department
Frank Dimroth. This combination of entrepreneurial ambition and technological acumen
is driving growth in this exciting new sector.

Northvolt is one of many companies attracted byclean energy and cleantech in Germany.

A quantum leap
The market for German environmental technology and resource efficiency was around EUR
400 billion in 2020. But the total volume is predicted to more than double by 2030, reaching
EUR 856 billion. “Germany has a pioneering
role: A huge market for sustainable technolo-

THE BOTTOM LINE
Cleantech is taking off big-timein Germany, as innovative­companies, large and small, areflocking to the heart of Europe.

gies is emerging here,” says Thomas Grigoleit(see focus story, pages 4 ff.). The rise of German
cleantech means that investments in innovative technologies are in demand here earlier
than in some other countries. “The demand
for green hydrogen for industrial applications,for example, is already very acute in Germany,”says Manfred Fischedick, scientific director of
the sustainability think tank Wuppertal Institute. Technologies such as “direct air capture,”
the direct extraction of CO2 from the atmosphere, are also in great demand, he adds.
This is one of the reasons why the Swisscompany Climeworks, which specializes inthis innovative technology, has also come to
Cologne. “Germany has been a pacesetter whenit comes to renewable fuels and materials madefrom CO2, which is known as Power-to-X,” says
Jan Wurzbacher, joint CEO of Climeworks. “Weplan to establish ourselves as key partners andsuppliers of CO2 from air for the emerging Power-to-X sector.” The company has raised almost
USD 784 million for its pilot projects.
Sun, wind and mobility
A strong argument for Germany as a cleantech
location is the easy availability of renewably
generated electricity, in particular solar andwind. Renewable energy sources play a key rolein any cleantech company’s choice of location.
“The more domestic renewables produce cheap

Photo: Northvolt, press photo, Svea Solar/Press

14

MARKETS GERMANY | Climate Protection

15

Erik Martinson, CEOand cofounder of
Sweden's Svea Solar,
which has expanded toCologne

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and clean electricity, as well as heat and hydrogen, the more attractive Germany becomes forcompanies that already make green energy aprerequisite for their location decision,” explains Simone Peter, president of the German
Renewable Energy Federation.
This helps explain the boom in innovative,
electromobility companies in the northeasternstate of Brandenburg: US carmaker Tesla with
its first European gigafactory; German–Canadian cleantech company Rock Tech Lithiumwith the world's first closed-loop lithium hydroxide production site; and German chemical
giant BASF with a factory for battery parts anda pilot plant for advanced battery recycling.
Brandenburg is seeing a boom in gigantic
solar parks. In late 2020, power company EnBW
began operating the Weesow-Will­mersdorf
Solar Park, at the time the largest (187 MW)
such facility in Germany. And in March 2022,
it completed another XXL (150 MW) park in

GERMAN CLEANTECH MARKETTO DOUBLE IN A DECADE
Market volume of environmental technology and resource efficiency in Germany€856

Gottesgabe. Further north, Schleswig-Holstein
is attracting companies with its powerful winds– the region fed a total of 24.4 terawatt hoursof wind electricity into the power grid in 2020.
That attracted Sweden’s Northvolt, which manufactures environmentally friendly battery
cells, to the town of Heide. “Our philosophy
is that new energy-intensive industries likebattery manufacturing should be located inclose geographic proximity to where the clean
energy is generated,” explains Peter Carlsson,
cofounder and CEO of Northvolt.

BILLION€392

CONTACTBILLION

2020
Source: Roland Berger

2030

robert.compton@gtai.com
GTAI cleantech expert

Photo: Svea Solar

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IN BRIEF

16

MARKETS GERMANY | In Brief

People around the world admire the spirit of invention that drives
the German economy. Here we spotlight some of the trends and research projects coming from Germany‘s east.

SMART GLASS THAT CAN TRACK,MEASURE AND FILTER
An award-winning glass from ZEISS integrates
microtechnologies

Photo: ZEISS press photo

The winner of the 2021 Thuringia Innovation Prize in the category“Light & Life” was ZEISS Microoptics from Jena for its highly
specialized, multifunctional “smart glass.” The new technology utilizes an invisible microstructural lens integrated into thesurface of the material for protection, detection, illuminationand filtering – without significantly reducing its transparency.
The smart glass is capable of facial recognition and eye tracking
without visible optical systems. It can be used in smart homes,
for instance, to filter sunlight, measure temperatures and display
information.
“You can introduce multifaceted functions into surfaces of whatever size you want,” explains the head of Zeiss Microoptics, Roman
Kleindienst, in a company statement. “It’s an absolute innovationthat should elicit great interest in areas like augmented reality
and in the automobile industry.”

www.zeiss.com/corporate/int/innovation-andtechnology/zeiss-ventures/portfolio.html

CYBER SECURITY COMPETITION
Government agency starts program providing
defense against cyberattacks

The Cyber Agency was founded in 2018 as the Agency for Innovation in Cybersecurity in the wake of a series of hacks and data
breaches worldwide and in Germany. It has EUR 230 million at its
disposal. The majority of these funds are earmarked for external
research projects.
www.cyberagentur.de/ (German only)

Photo: © iStock

Last July, the German government’s Cyber Agency in the city ofHalle in Saxony-Anhalt launched its largest-ever competition, worth
EUR 30 million. The topic is “Existential Threats from the Cyber and
IT Realm,” focusing on areas of national security and defense. The
program is scheduled to run for five years. Successful projects will
be oriented around the pillars of “prevention,” “detection,” “reaction”
and “attribution.” The competition announcement specifically mentions artificial intelligence as a tool for identifying and minimizing
weak spots and rapid detection and response to cyberattacks.

17

MARKETS GERMANY | In Brief

New technology can make “virgin” granules from waste plastics

Start-ups are booming thanks to a supportive ecosystem

One challenge with recycling plastics is material degradation. A recycled plastic bag,for example, may not be of the same quality as a new one. To address this issue, thecompany APK AG from Merseburg in Saxony-Anhalt has a solution it calls “Newcycling.”
According to APK's website, the technology is capable of producing “pure granulateswith properties similar to virgin plastics” from mixed plastic waste. Unlike chemical recycling, plastic is retained and re-polymerizing is unnecessary. In contrast toconventional mechanical recycling, there is no material downgrade, also known as
downcycling. The company, which was founded in 2008, has used the Newcycling
process to produce recycled material on an industrial scale since 2016. Its customers
include VAUDE, makers of fashionable plastic handbags and luggage.
www.apk-ag.de/en/

Photo: www.siliconallee.com

A STROLL DOWN SILICON ALLEE

Photo: VAUDE press photo“NEWCYCLING” OF PLASTICS

Berlin may have a long way to go to compete with Silicon Valley, but VC investments in the German capital are increasing exponentially – thanks in part to an
innovative infrastructure that includes initiatives like Silicon Allee.
Its 7,500-square-meter campus offers both office and living space and promises a“first point of entry to Berlin’s tech scene.” It provides a range of services including
start-up funding, trend reports, consulting and space for events. Companies currently or formerly on campus include Klarny, Point Nine, Drivy, zenloop and Klara.
More information about getting involved is available on Silicon Allee's website.
www.siliconallee.com

BACK TO THE FUTURE?

LUTHER PROMOTES LITHIUM
Research center will promote lithium-based technologies»We need at least
10, maybe 15,
lithium factories
here in Europe.«

GDR-era technology makes a comeback in hydrogen storage
Hydrogen technology start-up AMBARtec from the Saxon city of Dresden has
developed an approach to hydrogen energy storage that’s both old and new.
Instead of putting H2 in containers for transport, the firm’s HyCS technology
stores it in iron. The hydrogen is then released at the destination using steam.
The process is a modified and refined version of a technology first developed in
the Communist German Democratic Republic (GDR) but largely forgotten after
German reunification. The advantage is extremely high storage density. “OurHyCS storage systems are the most compact H2 storage systems known today,”asserts the company’s website.
www.ambartec.de/en/

ITEL head Ralf Wehrspohn

Photo: AMBARTEC press photo

The Martin Luther University of Halle-Wittenberg has inaugurated the Institutefor Technology and Economics of Lithium (ITEL), a new interdisciplinary research
center to promote lithium-based, CO2-neutral circular economies in Germany. It's
also promoting a dramatic increase in lithium production in the EU.
“We need at least 10, maybe 15, lithium factories here in Europe,” ITEL head Ralf
Wehrspohn told regional broadcaster MDR. “That entails investments of up to EUR
10 billion. They will of course also create jobs requiring skills that are a lot like thosepeople currently employed in the coal industry have.”
The initiators of the institute are three companies: Papenburg Waste Management,
Knauf Plaster and Rock Tech Lithium. As a collaboration between academia andindustry, the institute is, in Wehrspohn’s words, “unique in Germany” and presents“great chances for a technological advantage.”www.lithiuminstitut.com/

The Dresden start-up AMBARtec has revitalized a technology for storinghydrogen in iron containers that dates back to the GDR era.

18

MARKETS GERMANY | Location

Germany’s

LATE BLOOMER
The east of Germany is catching up, attracting a series ofhigh-profile, big-ticket international business expansions.
The region is finally delivering on a 30-year-old promise.

Eastern Germany has excellent
higher education opportunities anda world-class research landscape,as well as greater gender equality
in the workplace.

RECENT FOREIGN DIRECT INVESTMENTS IN EASTERN GERMANY
COMPANYORIGINLOCATION

PROJECTVOLUMEIntel

United States

Magdeburg, Saxony-Anhalt

Construction of two semiconductor factories

17,000

Tesla

United States

Grünheide, Brandenburg

Construction of an electric car factory

6,000

Iberdrola

Spain

Mukran, Mecklenburg-Vorpommern

Construction of two offshore wind parks by 2024
and 2026

800

Rock Tech Lithium

CanadaGuben, Brandenburg

Europe’s first lithium converter to build batteries
for e-cars

170

Kedali

China

Arnstadt, Thuringia

290

Vodafone Research

United Kingdom

Dresden, Saxony

UPM Group

Finland

Leuna, Saxony-Anhalt

Production site for ca. 60 million battery components
Ossustem
natateces
Global center
for research,development andet lictius nobita volent
innovation
eum laut as prepro velit
Bio-refinery,for sustainable
basic chemicals
ut y ffuatur,conse occ
produced from wood in the region

Source: GTAI

200
550

Photo: Stokkete, Adobe Stockin million EUR (minimum)MARKETS GERMANY | Location

opment plans. "Intel went to Magdeburg in
Saxony-Anhalt because they wanted them themost," says Holtemöller. It was a similar story
with Elon Musk and Tesla in Brandenburg. Jörg
Steinbach, the region’s minister for economics,
took a personal interest in the project, and now– just two years after construction began – cars
are already rolling off assembly lines.
"In general, the population is very positive
toward industry," says Silke Poppe, the GTAI
division director for eastern Germany. That
openness to change extends to renewable energy facilities. Some 40 new onshore wind turbines were built in Brandenburg in 2021 – morethan four times the number than in Bavaria,

high as in the east in 1991, today it is only 1.4
times. Of course, one source of eastern attraction is access to what is known as the “GRW”
cash incentives program (“Joint Task for the
Improvement of Regional Economic Structures"). Another advantage is that labor andlabor costs are lower than in the west.
But there's more to it than that. “Silicon
Saxony,” as the populous eastern state is now
known, is home to numerous microelectronics,
semiconductor and software companies. Oneof them is the US manufacturer GlobalFoundries. The company has been producing chips in
Dresden since 2009. "Dresden has a large network of suppliers and service providers," says
Jens Drews, director of government relations at
GlobalFoundries. The German outpost plans toincrease production capacities by 250 percent.
Saxony was the leading hub for microelectronics in Communist East Germany. That solid
basis, combined with a host of economic reconstruction programs in the eastern states,
has yielded a sensational catch-up process.
Other regions have developed new areas of
specialization. Brandenburg, for instance, isincreasingly becoming synonymous with batteries. Canadian cleantech company Rock Tech
Lithium is expanding to the town of Guben, not
far from Tesla’s massive gigafactory in Grünheide. It will begin producing climate-neutral
lithium from 2024. "A state-of-the-art cluster
for electromobility is currently being createdin Brandenburg," says Markus Brügmann, CEOof Rock Tech Lithium. "From our lithium processing to battery and cell production to e-car
construction, everything that is important to us
and for which we are important will be here."
One big selling point for the eastern statesis their flexibility and willingness to meet businesses’ needs and ability to fast-track devel-

which is bigger and more populous. "Especially in terms of climate protection, the easternstates sometimes outstrip the western ones,"
says Poppe. According to a survey by Deutsche
WindGuard consultancy, Brandenburg now has
the second-most onshore wind turbines among
the regional states. "The availability of renewable energy is an enormous advantage when it
comes to climate-neutral production, which isimportant to environmentally conscious companies," explains Poppe. "Plus the infrastructure is newer, from rail networks to schools anduniversities. And we have a state-of-the-art
research landscape here." The faculty–student
ratio in Thuringia, for example, is one teacher
for every 43 students – the best in Germany.
These factors, as well as the lower overall costof living, affordable property prices, greater
gender equality in the workplace (a legacy fromthe Communist era when women shared thework) and affordable, quality childcare have apositive impact on attracting professionals tosettle in the region.”
All in all, there has never been a better time
for international businesses to come to eastern
Germany – before it catches up with the west.

THE BOTTOM LINE
The unique qualities of­Germany’s east offer competitive advantages to international
businesses that choose to expand there. Numerous subsidies
from local and national governments are still available.

GENDEREQUALITY IN
THE WORKPLACE
Share of women at the first andsecond management level incompanies in western and eastern
Germany in 2018
1ST MANAGEMENT LEVEL:

31 %IN EASTERN GERMANY

25 %IN WESTERN GERMANY

2ND MANAGEMENT LEVEL:

46 %IN EASTERN GERMANY

40 %IN WESTERN GERMANY
Source: Institut für Arbeitsmarkt- und Berufsforschung

CONTACT
structural-change@gtai.com
Germany Trade & Invest's
division for eastern Germany
and structural change
Photo: Adobe StockB

lossoming landscapes – that was theflowery phrase West German Chancellor Helmut Kohl used in 1990 to
describe the future of the former Communist
east when it was being incorporated into theFederal Republic. But the regional economy did
not immediately flourish after reunification,
despite Germans paying a special “solidarity surcharge” in their taxes. In fact, over thethree decades that followed, many worried that
Germany’s east would be forever left behind.
Those concerns have dissipated in the past
few years, as companies like Intel, Tesla, CATL
and others have expanded east. While GDP inwestern Germany was almost three times as

19

20

MARKETS GERMANY | Location»WE’RE ­REDRAWINGTHE ECONOMIC MAP
IN GERMANY«
For years, economic development in eastern Germany has lagged behind the rest of thecountry, but a series of massive business expansion projects is turning the tide. The
national government’s commissioner for eastern Germany, Carsten Schneider, discusses
the growing momentum in those regions.
Former German Chancellor Helmut Kohl
famously promised blossoming landscapes for the east after German reunification in 1989-90. How well do you thinkthat promise has stood up?
CARSTEN SCHNEIDER: Right now we’re witnessing the redrawing of the economic map
in Germany. Eastern Germany is profitingfrom companies in key technologies investing billions in new locations and creating new
industrial jobs. Tesla’s factory in Grünheide
near Berlin is already up and running. Great
progress has been made on the CATL battery
production facility in Thuringia. And Intel has
decided to come to Magdeburg – there’s still alot to do, but the perspective is more than rosy.
Politicians at the national and regional level
have created the conditions necessary to makeeastern Germany a leading economic area, forexample, in hydrogen technology.
Germany needs international companies toexpand to and within the country – that’s
especially true for key technologies likeelectric mobility, robotics and biotechnology. Why should international companies
set up shop in the east?
CS: Eastern Germany has advantages that haveplayed a central role in companies’ decisions
to locate subsidiaries there. They include
the availability of land, a headstart in termsof renewables and a central location at theheart of Europe. Moreover, eastern Germans
are very positively disposed toward industry.
And there’s a modern infrastructure and very
good universities at the forefront of researchand innovation in key technologies.

»Eastern Germany
is very attractive –there are more andmore returnees.«
Carsten Schneider

How does the government encourageinternational companies to come to theregion?
CS: For starters, there’s Germany Trade & Invest, which – along with the economic promotion agencies of the Federal Republic of
Germany’s sixteen regional states – markets
eastern Germany and has performed well in
the past. Of course, marketing isn’t everything.
Sometimes financial incentives have to be offered, as was the case with Intel in Magdeburg.
For Intel, the national government has taken
on most of those incentives, in part because
we want to become more independent fromglobal semiconductor supply chains. Anotherfactor is the complete determination of theeastern regional states that large projects
succeed there. A good example is Tesla. The
regional government of Brandenburg, and inparticular its Minister for Economic Affairs,
Labor and Energy Jörg Steinbach, put a lotof effort and professional expertise into successfully concluding a complicated permits
process. Many people doubted that this would
be possible. Brandenburg showed that it is.

Some parts of the east have a reputation
for being rather skeptical about foreigners.
How do you overcome that challenge?
CS: The biggest obstacle to the economic development of the east is the shortage of specialists
and labor in general. We have to come together toaddress these structural impediments to growth,and part of that is being open to immigration.
In some sectors, it’s barely possible to fill open
positions. The 2021 Employment Office survey ofeastern Germany commissioned by the Ministry
for Economic Affairs and Climate Action showed
that, even in the second year of the coronavirus
pandemic, more than a third of eastern German
companies were searching for highly qualified
employees. Extrapolated, that meant 550,000
specialists were needed in the first half of 2021
alone. Skilled foreign workers aren’t competition.
They’re a necessary supplement. And that message is slowly but surely getting through. We haveto vigorously oppose xenophobic tendencies.
The stereotype is that people in the east
speak little to no English. Is that true?
CS: I’d say that idea is obsolete. Maybe that wastrue in 1990 after many years in which school
curricula in Communist East Germany had
other priorities. But I’m sure that for the last
20 years or so, graduates in eastern Germany
have spoken English just as well as elsewherein Germany. In fact, the eastern German states
generally do well in educational rankings.
Eastern Germany is still quite rural. Many
young people move to the cities, some in
the west. How are you trying to make theregion a more attractive place to live?

MARKETS GERMANY | Location

21

THE INTERVIEWEE
Carsten Schneider has been a memberof the German Bundestag since 1998. The
46-year-old is a member of Chancellor Olaf
Scholz's SPD party. Schneider's constituency is in Erfurt in the German regional stateof Thuringia. He has been the national
government's commissioner for eastern
Germany since 2021.

Some demographic forecasts predict that theworking population in eastern Germany will
decline 10 percent by 2040. One solution is immigration. How do you cultivate a welcoming
environment for international employees?
CS: I continually emphasize that we need an
influx of both highly skilled and other kindsof labor. The national government is currently
working on a strategy to attract skilled workers,
and this issue will play a major role in it. I’m
always arguing that we need to be more open to
immigration both in society and in the economy.

This will require a change of mentality in someregards. But I’m confident we’ll succeed if weall pull together.
In the wake of Intel’s decision to build its
microchip “mega fab” facility in Magdeburg, the city announced plans to establish
an International House with a welcome service. Is that just window dressing?
CS: There are similar welcome centers in other
cities, for instance Berlin and Hamburg. Theseare eminently sensible institutions and havebeen very well received. Anyone who has everlived abroad for some time knows the bureaucratic challenges that can entail. The welcome
service is intended to support new arrivals intheir early days in Germany.
Eastern Germany often has development
projects and programs that cross regional
state boundaries. The Leipzig/Halle Airport and the Lusatia Investor Center are
two examples. How does that work?

CS: Economic promotion doesn’t begin andend on regional borders. Naturally, the states
are friendly competitors, but in the case of
those examples, they are also linked with one
another. And states can pool their resources.
The eastern German states have just decided
to do this for a joint hydrogen interest group
to make progress in this area together. I thinkthat’s the right path to go down.

Where do you see the east in ten years’ time?
CS: The potential is enormous. The transformations we are facing are a chance for the east
to set the pace for the entire country. People inthese regions are used to change. They’re welleducated, and eastern German infrastructure
has widely and very skillfully been expanded. Those are factors that will play a role inyears to come. If we continue to strengthen
research and keep working at the forefront of
key technologies, we can redraw Germany’s
economic map in the long term to the benefitof companies and people living in the east.

Photo: picture alliance/dpa/Carsten Koall

CS: Eastern Germany is very attractive, andthere are more and more returnees. There arelots of reasons for that. The cost of living islower than in the west, as most property markets aren’t as badly overheated, schools aregood and childcare is traditionally better thanin many places in the west. Nonetheless, wehave to keep at it and expand infrastructure inorder to better connect rural regions. This issomething we’re constantly working on.

22

MARKETS GERMANY | Technology

BACK ON THE
MICROCHIP
MAP

Photo: Quardia Inc.

For decades, the United States and Asia have dominated semiconductor
production. But now Germany is poised to become one of the leading
chip makers in Europe and the world. With theongoing global microchip shortage, it’s high time for such a shift.

MARKETS GERMANY | Technology

Up close and personal witha microchip: The domestic
manufacturing market for
chips is growing strongly inGermany.

Y

our cell phone. Your laptop. Your
flatscreen TV. Your car. All of youressential devices rely on microchips.
And if you tried to upgrade any of those itemsin the past year, you may have noticed shipping
delays, increased prices or lack of stock. The
global microchip supply chain problems are toblame. Average wait times for orders more thandoubled between 2020 and 2022, according tobusiness news agency Bloomberg.
This is bad news for a country like Germany that specializes in manufacturing sophisticated technological products. The solution?
Diversifying supply and value chains, which
includes the strategy of relocating production to Europe and the continent’s economic
heartland.
That’s the background to a number of international tech firms’ decisions to expand to
and within Germany – most prominently, theUS giant Intel with its record-setting, 17-billion-euro, new semiconductor production
facility in Magdeburg in the eastern state of
Saxony-Anhalt. It’s the largest foreign directbusiness investment ever on German soil.
“The past years have shown how delicate
supply chains are and what sweeping consequences their collapse can have,” says Christin Eisenschmid, managing director of Intel
Germany (for an extensive interview with her,see Markets Germany 2/2022).
“Europe, and especially Germany, is backon the map,” says semiconductor expert Max

Milbredt, who was the project leader for theIntel site selection process. So how did thesector get to the point where it needed to shift
its geographical configuration?
A pain in the bottleneck
The ongoing semiconductor shortages were
initially spurred by shutdowns during thecoronavirus pandemic. But they’ve been ex-€50
BN
Expected government support
for semiconductor industry inGermany

THE BOTTOM LINE
Diversified supply chains andmore microchip productionin Europe and its commercial
heartland Germany offer longterm opportunities for international companies.

acerbated by other factors, including tradewars and actual wars.
Tensions between the US and China havecreated concerns about global over-reliance onchip manufacturing in Taiwan. And the sanctions on Russia after its invasion of Ukraine
have made it more difficult to obtain raw materials such as palladium, used in manufacturing
semiconductors. Moreover, Ukraine is a major
supplier of neon gas, which is also crucial in
the semiconductor manufacturing process.
Across the board, industries that dependon chips – from automobiles and personal
electronics to telecommunications and theInternet of Things – have been held back by
the squeeze. And it’s not clear when the bottlenecks will cease.
KPMG’s Global Semiconductor Industry
Outlook 2022 found that, as of the fourth quarter of 2021, 56 percent of industry insiders
expected the chip shortage to be resolved in
2023, while another 3 percent thought it would
persist until at least 2024. A further survey
from the second quarter of 2022 showed that 65
percent of insiders expected the chip shortage
to be resolved in 2023, and 18 percent thought
it would last until at least 2024.
European and German response
The EU and Germany have reacted with rapid
measures to boost domestic chip production
capacity and develop supply and value chain
resilience. The European Semiconductor Act,

23

24

MARKETS GERMANY | Technology

6
FACTORS THAT ATTRACTSEMICONDUCTOR PRODUCERS TO GERMANY
announced in February 2022, sets the target ofincreasing EU production capacity to 20 percent of the global market by 2030. That would
require quadrupling current capacity. The European Commission has earmarked EUR 43
billion for that purpose.
The European Union also declared microelectronics an Important Project of Common
European Interest (IPCEI), which opens thedoor to public funding in 20 countries, including Germany. Meanwhile, the German
government is investing EUR 14 billion incompanies working on 32 projects in energy-efficient chips, power semiconductors, smart
sensors, advanced optical equipment and newcompound materials. All told, Germany has
pledged to spend up to EUR 50 billion and is
striving to become the undisputed heart ofEurope’s semiconductor industry.
That makes Germany even more attractive as an expansion location for multinationaltech companies. And advantages like a highly skilled labor pool outweigh factors like thecost of labor. “Semiconductor manufacturing
requires well-educated people,” says Michael
Pritzer, partner and COO Audit at KPMG Germany. “Labor costs are increasing in Germany,as they are in the US, due to the competition
for qualified talent, but I believe Germany isstill attractive.”
Benefits for Magdeburg and beyond
Magdeburg and Saxony-Anhalt now stand toreap big rewards. Intel estimates its “Silicon
Junction” site there will create 3,000 permanenthigh-tech jobs for producing next-generation,
two-nanometer-wide chips. The “mega fab”
facility is scheduled to start operations in 2027.
The eastern German location is the keystone of Intel’s plans to spend a total of EUR
80 billion on its European operations over the
next decade. “Together with the Magdeburg
fab, our investments in France, Ireland, Italy,
Poland and Spain play a crucial role in building
a state-of-the-art semiconductor ecosystem inEurope,” says Intel’s Eisenschmid.

1

Domestic demand
Europe uses 9 percent of all microchips produced worldwide, and 37 percent of them
go toward auto manufacturing, according to
ZVEI. As Europe’s largest economy, Germany’s
appetite for chips is only expected to grow. In
2021, the market for power semiconductors in
Europe’s auto industry was USD 9 billion; by2030, it’s expected to reach USD 36 billion.

2

The qualified workforce
Of Germany’s roughly 43 million employedpeople, 83 percent have completed apprenticeships, vocational training or university
courses.

3

Political stability and EU access
Germany ranks highly for political and economic stability. Its central location in the European Economic Area provides fast access to
the rest of the continent via road, rail and ship.

4

Research institutions
Germany’s R&D landscape is a unique tripartite constellation of the private sector, universities and research organizations. Companies in Germany invested EUR 22.7 billion inthird-party R&D in 2019.

5

Sufficient space
There is ample land available at competitive
costs for major industrial projects in Germany’s east and other areas undergoing structural change. For instance, the site of Intel’s
Magdeburg mega fab facility has an area of
380 hectares and borders on the Autobahn.

6State assistance
The EU and Germany offer generous subsidies to chipmakers expanding to or within
the bloc. State funding programs help companies to set up in areas of the country undergoing structural transformation.

And the sector in neighboring Saxony will benefit as well. “Intel's investment will bring thecompanies in the region even closer together,”said Dirk Röhrborn, head of the Silicon Saxony
industry association, on the group’s website.
“Above all, the big winners will be the SMEs
right on their doorstep which will support Intel in getting production up and running. Our
member Intel is enabling new perspectives
for cooperation in the field of research anddevelopment. The Silicon Saxony region will
also benefit and continue to grow in terms ofinternational skilled workers.”
A growing tech trend
Other global tech leaders are also expanding
their presences in Germany. In May, US techcompany Qualcomm won a major order forsystem-on-a-chip (SoC) wafers from Volkswagen to power its future autonomous driving
solutions. CARIAD, the Volkswagen Group's
software company, is collaborating with Qualcomm to design Snapdragon Ride SoCs tailoredto the automaker’s needs.
“Germany in particular is the heart of our
European operations and home to around halfof our European workforce,” says Enrico Salvatori, president of Qualcomm Europe/MEA.
“Our expansion in Germany has, in part, been
driven by our close working relationship withthe big car brands and tier-one suppliers. The
opening of the automotive office in Berlin waspart of our expansion to work with, and provide
services to, the German automotive industry.”
Qualcomm has also collaborated with BMW
and Audi in the automotive sector, as well as
Bosch and Siemens on manufacturing automation. “Germany has a rich and deep poolof R&D, engineering and automotive talent,”
Salvatori says.
American electronics manufacturer Vishay Intertechnology is investing at least
EUR 320 million in the first phase of a newchip factory in Itzehoe in northern Germany.
“Geopolitically, it is important to have a European location to strengthen independence

MARKETS GERMANY | Technology

25

An architectural rendering of the new Intel
plant currently being built in Magdeburg,
eastern Germany

HOW INTEL CAMETO MAGDEBURG

Photo: Intel, press photo

In December 2020, Intel reached out to theGerman Chancellery and contacted Germany
Trade & Invest in early 2021. Finding a suitable site for such a huge project was a majortask, and Germany wasn’t the only country
the company was considering for its European
expansion.
“After our initial meeting and learning about
the very demanding requirements, I immediately called up all of our partners in all 16
German states,” recalls Max Milbredt, former GTAI expert. He was able to provide alist of potential sites within three businessdays. Magdeburg featured from the very beginning because the site was so close to thecity center. But there was a snag: “The initialplot under discussion was too small to meetthe requirements,” Milbredt says. “And to behonest, Magdeburg was a bit of an underdog
because they don’t have a long history ofsemiconductor design or manufacturing asother places did.”So he went back to the city
and asked if there was a way to expand the
proposed plot of land. The solution was theneighboring municipalities of Wanzleben andSülzetal offering more space. “I had never seena single site of this size in ten years in this job,”
Milbredt says.
Magdeburg managed to propel itself to the topof the list of contenders. “The city’s deputy

mayor and her team responded incredibly
quickly and efficiently to all the issues thatcame up over the many months,” Milbredt recalls. For example, the city ensured the supplyof electricity and water needed to run a stateof-the-art semiconductor fab. And it prepared
the fab sites’ potential future neighbors whilestill operating with confidentiality – all thisin the midst of a global pandemic.
“I never imagined how much work it would be
for me to personally drive Intel VPs across almost
all of Germany to look at sites with masks on thewhole time,” he remembers. “I am not a professional chauffeur, so that was a new experience
for me. We basically did whatever it took.”

26

MARKETS GERMANY | Technology

from China,” says Dr. Gerald Paul, Vishay’spresident and CEO. “Germany is an important
automotive market. The new 12-inch-chip manufacturing facility in Itzehoe is clearly focusedon the automotive business.”
Vishay’s existing 8-inch-wafer production facility in Itzehoe was a major factor in
the location of the new project, as was having
good neighbors. “Itzehoe provides stability
and all the infrastructure needed to support
expansion. The semiconductor industry poolwith the Fraunhofer Institute offers the rightenvironment,” Paul says.
Meanwhile, Apple is investing more than
EUR 1 billion in its European Silicon Design
Center in Munich. The 30,000-square-meter
facility, which will focus on mobile wirelesssemiconductors, should be operational by theend of 2022. Finally, Bosch has put EUR 1 billion in a state-of-the-art production facility
in Dresden that opened in 2021. The plant is
Europe’s first fully digitalized semiconductor
production facility, making chips and sensors
for the auto industry. Bosch received EUR 140
million in IPCEI funding for the project, which
has created 700 new jobs in the eastern stateof Saxony.
Long-term solutions
No one is under any illusions that these projects will solve the semiconductor problem atthe drop of a hat. Production facilities, after
all, take time to construct and go operational.
The protagonists in Germany and elsewherein Europe are in it for the long haul. “It will
be interesting to see these large investments
continue,” says Milbredt, who notes that someof the companies now expanding into Germany
are doing so even without government subsidies. “But there will still be a strain on thesystem since the factories being built will takeabout three years to come online.”
Milbredt is also keen to see how capacity
develops in conventional models of semiconductors. “There isn't sufficient investment
into these ‘older’ chip types, but that's what
the automotive industry mostly needs,”
Milbredt says. “The new sub-10-nanometerfabs are most relevant for smartphone andPC manufacturers.” Demand for microchips
and nanochips will grow exponentially as thetransition to green energy and electric mobil-

AVERAGE WAIT TIME FOR CHIP ORDERS
25.7 weeks

As of January 1 of each year

14 weeks

14.5 weeks

2018

2019

15 weeks
12.7 weeks

2020

2021

2022

Source: Data from Susquehanna Financial Group/Bloomberg

ity progresses and as big data and artificial
intelligence become increasingly important.
That’s true for Germany and for many global
economies.
“The semiconductor industry is international,” says KPMG’s Pritzer. “Any individual
chip in a product could probably qualify forfrequent flier status with Lufthansa, considering how many times it goes around the world.”
Many companies are diversifying their
suppliers to become more resilient where
semiconductors are concerned. Flexibility andadaptability are key to remaining competitive
despite disruptions. Pritzer cites the example ofautomakers, whose overall volume was down
during the pandemic but whose profits were up
because they focused on higher-value, technologically advanced vehicles. “Despite the huge
global financial problems, these companies are
all doing very well.”»Semiconductor­manufacturing­requires well-­
educated people.«
Michael Pritzer, partner KPMG Germany

CONTACT
jerome.hull@gtai.com
GTAI expert for electronics andmicrotechnology

Made in Germany:
A technician holds up
a 12-inch silicon wafer,the kind used in auto
manufacturing.

MARKETS GERMANY | Technology

27

HOT HUBS
Semiconductor production and
R&D is ramping up across Germany, north to south and east to

01

west. Saxony, Baden-Württemberg and Bavaria are three of themost prominent hubs.

03

Photo: I'm Thongchai

GERMAN SEMICONDUCTOR NETWORKSTO KNOW ABOUT
01 - SILICONSAXONY

02 - MICROTEC
SÜDWEST

03 - BAVARIANCHIPS ALLIANCE

Silicon Saxony is a network for the microelectronics, smart systems, photovoltaic andsoftware sectors. The Cool Silicon cluster
focuses on developing energy-efficientsolutions in computing, broadband wirelessand sensor networks. Saxony is Europe’s
biggest microelectronics location, home tocompanies including GlobalFoundries,
Infineon and Bosch.

The microTEC Südwest cluster in thesouthwestern regional state of Baden-Württemberg is a major European expertiseand cooperation network for intelligent
microsystem technology solutions in manufacturing and health. With its Dutch partner
ASML, Oberkochen-based Zeiss is the world's
only manufacturer of extreme ultraviolet
lithography machines for chip production.

Bavaria is home to some of the world’s
leading semiconductor producers, including
Infineon Technologies and Siltronic, as wellas the Bavarian Chips Alliance. As the site ofmany leading actors in electrical engineeringand electronics, the southern state plays a
big role in the development of technologies
for the digital networking of industry, bigdata solutions and the Internet of Things.

Photo: Adobe Stock02

MARKETS GERMANY | Technology
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FRANKFURT LEADS GERMANY’S DATA REVOLUTION
IT performance of Germany's most important data center locations

HAMBURG

33 MW

BERLIN

37 MW

MUNICHFRANKFURT

50 MW
459 MW

Photo: Cloud&Heat, press photo28

MARKETS GERMANY | Technology

29

DECARBONIZING
the Data Industry
Germany's data center sector is expanding like never before and simultaneously undergoing a
quiet revolution in energy efficiency. International companies are helping make the physical actof processing information better for the ­environment.

T

he invisible infrastructure underpinning the Internet is in the midstof great change. Firstly, data centercompanies are increasingly administering theirbusiness off premise. Secondly, Germany has
put a premium on business solutions that focus
on climate action and maximal efficient useof resources.
Britain’s Telehouse, a firm that specializes
in colocation data centers, has seized the moment. Béla Waldhauser, CEO of Telehouse Germany, is seeing growth rates of 10 to 15 percent
per year. “Honestly speaking, we can't build
new data centers fast enough,” he says. “Ourvacancy rate in Q1/2022 is down to 9 percent,which is an all-time low.”More and more German start-ups aredeveloping innovative waste-heat solutions.
Dresden-based Cloud&Heat offers some of themost resourceful data centers in the world.
Windcloud, from the town of Enge-Sande near
the North Sea, has built Germany's first carbon-absorbing data center that is powered by
100 percent wind, while its waste heat is used
to raise CO2-absorbing algae. Then there’s theEurotheum skyscraper in Frankfurt, which uses
its in-house data center to provide heat to the offices, hotel, and restaurant under the same roof.
This flurry of innovation in the data sector
has attracted the attention of major players.
Telekom is working together with the Fraunhofer Institute to create several new technologies that make data more energy-efficient.
Telehouse is at the forefront of that initiativewith the Westville residential project in Frankfurt-Gallus. Due to be completed in 2025, thedevelopment will include 1,300 apartments.
“It's a real beacon project in Germany,” says
Waldhauser. The CEO is also the spokesperson
for the Alliance for the Strengthening of Digital»We can't build new data
centers fast enough.
Our vacancy rate is down
to 9 percent – an all-time
low.«
Béla Waldhauser,
CEO of Telehouse Germany

Infrastructures in Germany and a board member of the Climate Neutral Data Centre Pact.
“The most attractive market in Europe”
Europe is dominated by four data-center markets – Frankfurt, London, Amsterdam andParis – but there are signs that the hierarchy isshifting. Waldhauser is among many observers
who believe Frankfurt is currently “the most
attractive market in Europe.” Despite the factthat German energy prices are relatively high.
There is a variety of reasons why the city has be-come such a coveted location, explains Isabel da
Silva Matos, digital economy specialist at GTAI.
For one thing, Frankfurt has the world's largest
Internet node, DE-CIX, where around one thousand primarily European networks converge. It’s
also a well-known hub of European finance andhome to the German Stock Exchange and theEuropean Central Bank – huge institutions thatneed to ensure they can transfer data quickly
and securely. But other German cities such as
Berlin, Munich or Hamburg are also becoming important data nodes. “Proximity to thecustomer plays an important role too, not justspeed,” Matos says. “And clients want to be surethat their data doesn't just end up being stored
anywhere. Germany is the biggest economy in
the EU and is considered very secure.”
Ambitious government plans
The escalating climate emergency and Russia’s war on Ukraine mean that data centercompanies need to be more than just well located: They must also lower carbon emissions.
Major players in Germany have signed on to
the EU's goal of climate neutrality by 2030.
But Olaf Scholz's government wants to movefaster, pledging to make new data centers
CO2-neutral by 2027. It has provided funded
programs for developing new environmentallyfriendly technologies.

THE BOTTOM LINE
Germany's data center sector
is not only one of the biggest
in ­Europe but also increasingly
at the forefront of innovative­energy efficiency solutions.

CONTACTisabel.matos@gtai.com
GTAI expert for data center

MARKETS GERMANY | Technology
Location

BUSINESS INCORPORATIONGOES DIGITAL
Setting up shop in Germany has never been easier thanks
to recent technological improvements. Germany Trade &Invest expert Christina Schön walks us through thenew possibilities.

CHRISTINA SCHÖN,
senior manager tax &legal at Germany Trade& Invest
Christina assists international companies
seeking to enter the German market withinvestment projects and specializes in all legal
matters purtaining to founding a business.

What is a GmbH?
The GmbH (German private limited liability
company) is the most popular company formin Germany – there were more than 550,000
GmbHs with a turnover above EUR 22,000 in
2020. The incorporation of a GmbH requires a
German notary, and until recently it was necessary to meet with them in person. Since August
2022, it's been possible to form a GmbH online
purely by cash contribution. From August 2023,
the scope of online GmbH formation will be
extended to include non-cash contributions.
An exemption to this is the contribution ofassets whose transfer is subject to notarization(e.g. real estate or shares in a limited liability
company). Additionally, online procedures ofcommercial register applications have been
implemented for all legal entities.
How does online incorporation work?
The online notarization takes place in a videoconference between the notary and the parties involved. For this purpose, the German
Federal Chamber of Notaries provides a video

SE
TU
Y
GM OU P
GE B RRM H INAN
Y!

Photo: AdriaVidal

30

communication system with a two-step identification procedure that requires an electronic
proof of identity – called an eID. To access theprocedure, you have to register with the eIDfunction of the identity card and extract thephoto from the chip of the ID card. Informationand documents are exchanged online with thenotary, and the notarization takes place in avideo conference. The signatures required forthe incorporation are obtained by means ofa qualified electronic signature. The Federal
Chamber of Notaries has published an FAQ.

personalausweis.de gives the full details on
different identity cards and their eID function.

What about the rest of the process?
The other steps that don’t need to be performedin front of the notary, such as setting up a bankaccount and making the required capital contribution, remain unchanged and are still required
for applying to the commercial register.

What advantages does the online process offer?
Incorporated businesses can, for instance, already benefit from the new online proceduresfor commercial register applications. For newGmbHs, it enables remote and faster incorporation. There is also a new rule that incorporations
must be registered in the Commercial Register
within ten working days from the initial dateof the application. This period can be reduced
to five working days where certain model documents are used.

Who stands to benefit from the new
digital formation proceedure?
Nowadays many identity cards offer the required eID function. German nationals can use
eID verification on national ID cards issued
as of 2017. However, third-country nationals(citizens that originate from a country that is
not a member of the EU or the EEA) with aGerman electronic residence permit can also
use the function. Since 2021, all other EU or EEA
citizens who are 16 years or older can apply for
an eID card in Germany. This card is intended
only for the use of digital services. The website

Can non-German eIDs be used as well?
Electronic identification programs of other EU
or EEA member states may also meet the requirements if they comply with the EU eIDAS
regulation and correspond to the requirements
for the Level of Assurance “high.” Entrepreneurs unsure about whether their eID is valid
should discuss this individually with the notary
performing the service.

CONTACT
christina.schoen@gtai.com
GTAI expert for tax and legal topics

MARKETS GERMANY | Location

31

UNLEASH FUTURE BOATS
Autonomous cars have been a hot-button topic for years. But can the technology be
brought to the oceans and rivers of the world? A team of entrepreneurs and engineers
with experience in the German car industry is hoping their self-driving ship will come in.

Ships with no captains or crew? A
Schleswig-based start-up called Unleash
Future Boats imagines just such a future.
It has invested heavily in the concept of autonomous vessels for ferrying people and cargo and

UFB vessels are powered by electric motors andhydrogen fuel cells, thereby reducing emissions
and noise pollution along heavily populated
river routes. “There are so many possibilities
for innovation in the maritime sector,” says co-usual rules governing watercraft were temporarily suspended to allow experimentation. “We’reable to modify the regulations just for this areaand see what’s possible,” Engelhard says. “It’ssmall and perfect for developing our technology.”saving money, at the same time reducing theenvironmental impact of the maritime sector.
The company’s ambitious projects include
autonomous water taxis, capable of carrying
a dozen passengers, that aim to make urban
water travel more efficient. Founded in 2020
by Lars and Stefanie Engelhard, two German
engineers with top-level experience in electromobility and autonomous systems, Unleash
Future Boats (UFB) is also working on fleets ofcargo ships and tugboats for container ships

founder Stefanie Engelhard. “We are rewriting
the rules of maritime transportation.”

The project is one of the ministry’s regulatory “sandboxes” – real environment tests
of innovative technologies, products, services
and approaches. They’re part of a larger push
to slash red tape in industries with big potential for reducing greenhouse gas emissions.
“They allow new digital and sustainable technologies to be tested in the real world, even
if the general regulatory framework does not
yet permit this,” says a spokesperson for theministry, Robert Säverin.

A sandbox on the water
And that has attracted attention in high places.
This year, UFB received permission from the German Ministry for Economic Affairs and Climate
Action (BMWK) to explore what kind of changes to laws and regulations would be needed tomake autonomous watercraft a reality. On the
42-kilometer Schlei Inlet, north of Hamburg, theGermany’s “regulatory sandboxes” support business innovation by providing opportunities to test
regulations for experimental new applications,
including AUTONOMOUS MACHINES, AI AND
CLIMATETECH. “Along the way, we learn about
the impact of innovations on the economy, society
and the environment, as well as the necessary legal
framework,” says BMWK spokesman Robert Säverin.
“This allows for more innovation-friendly laws andfaster transitions from research to market.”Lars and Stefanie Engelhard from Unleash Future Boats with
Minister for Economic Affairs and Climate Action Robert Habeck.
The company received special permission to change water rules
to test zero-emission autonomous mobility and logistics.

Photo: Unleash Future Boats, press photo

SANDBOXES TO SUPPORTINNOVATION

32

MARKETS GERMANY | Technology

DARWIN'S SOLUTION
for Complex Plastics
International companies that come to Germany get direct access not only toEurope’s biggest market but to a unique R&D landscape. The Japanese–
German conglomerate behind the DarWIN tool is a prime example.

Photo: plus10 GmbH, press photo

An AI-enabled plus10
smartphone communicateswith shopfloor staff to reduce scrap and cycle time.

L

ike many companies dealing in plastics, Sumitomo (SHI) Demag faced aproblem. Environmentally conscious
consumers are deeply skeptical of the material
that is causing so much damage to ecosystems
in our oceans and on land. But the core business of this medical instruments manufacturer,
formed in 2008 after the merger of Japan’s Sumitomo Heavy Industries and Demag Plastics
Group from Schwaig in Bavaria, depended on it.

THE BOTTOM LINE
Research institutes, clusters andtheir spin-offs help the private
sector solve complex technicalproblems and are a major advantage for international companies
with a presence in Germany.

Artificial intelligence (AI) offered a possible
way forward for optimizing plastics-processing machinery by making it more efficient andsustainable. There was just one problem. “Beinga classic machine builder, AI is obviously not ourhome turf,” says Dr. Thorsten Thümen, Sumitomo (SHI) Demag’s senior director of technology.
That made the firm “very keen to connect toGermany’s network of AI-related start-ups.” It
didn’t have to search long for a solution.

MARKETS GERMANY | Technology

Survival of the fittest
Meet DarWIN, a new research project fromthe start-up plus10, an AI spin-off of the
Fraunhofer Institute for Manufacturing Engineering and Automation (IPA). The project’s
focus was to develop an intelligent optimization tool for the sort of injection-molding
machines Sumitomo (SHI) Demag needs tomake its products for medical and electronics customers.
“Injection molding is a very complex industrial field with many influencing factors,
and we hope that the results of DarWIN will
help us understand for which processes AI
may provide feasible future solutions,” says
Thümen.
Aside from speeding up injection molding and reducing plastics wastage during theprocess, DarWIN’s AI can also be programmed
to facilitate the separation of heterogeneous
plastics – such as post-consumer scrap – in an
economically viable manner. If successful, it
would represent an evolutionary step for theplastics recycling industry.
DarWIN allows machines to teach one another, so that computing behavior patterns do
not have to be learned from scratch by anotherdevice every time a new product is adopted.
Smart machines only need a short calibration
phase: This involves algorithms proposing optimized process parameters for the next production cycle under given conditions, such as
raw material characteristics and the shopfloor
climate.
In January this year, DarWIN saw its final
testing series on machinery provided by Sumitomo (SHI) Demag. Through its contribution to
DarWIN, which also included funding a real test
environment, the Japanese–German company
is directly supporting innovation for the next
generation of machines, as well as safeguarding
its own future.
Top notch R&D clusters
The Sumitomo (SHI) Demag machines used in
DarWIN are fully electric – a capability added

FRAUNHOFER:
BRIDGING R&D
BETWEEN JAPAN &GERMANYInterview with Kazuhiro Hayashida, assistant manager, Fraunhofer Representative
Office JapanHow does the Fraunhofer ­Representative
Office Japan facilitate cooperation
between Fraunhofer and Japanese scienceand industry?
We act as a bridge between Fraunhofer’s 76
institutes and Japanese customers from industry, academia and other sectors. In 2021, we
achieved contract research revenue of EUR 15.2
million from Japanese industrial customers and
we receive around 300 inquiries from companies here every year. Those research projects
relate to a wide variety of fields including microelectronics, surface and production technology, IT, materials and innovation researchand life sciences. We are happy to support andcoordinate R&D projects and play our part inbuilding a win-win situation between Germany
and Japan.
What makes the German R&D landscapeinteresting for Japanese ­industry?
With its cutting-edge research facilities andtechnologies, Fraunhofer provides R&D services near the customer. We often receive
inquiries from customers who had tried tofind appropriate research institutes for theirtechnological challenges and then finally findthe right solutions at Fraunhofer. There is also
a lot of interest here in the collaboration between industry and academia – collaboration
which characterizes Fraunhofer. Reflecting this,Japan's Minister for Reconstruction, Kosaburo
Nishime, visited three Fraunhofer institutes in
Stuttgart in May 2022.

by the company in recent years when it dedicated one of its two German plants entirely
to building machines that have full electric
control. According to the company’s CEO, Gerd
Liebig, the change initially resulted in a reduction of orders but has since proven rewarding.
“Our forecast that the markets will shift towardsustainability has been met, and our timely decision has translated into a major competitive
advantage,” Liebig says.

33

That advantage is directly related to Germany’s one-of-a-kind, multivalent R&D landscape.
Plus10, for instance, is part of the Cyber Valley
research cluster in the southwestern regional
state of Baden-Württemberg, which has become a go-to destination for companies seeking
to enhance their products through basic AI
research. Plus10 has an intense research exchange with Germany’s renowned Max Planck
Institute and the Fraunhofer Institute, which
also maintains an office in Japan. In the caseof DarWIN, the start-up worked with Germany’s largest plastics research institute SKZ in
Würzburg, Bavaria. SKZ covers the whole rangeof plastics research, including materials, machinery and processes.
“The good cluster networking as well as ourown interdisciplinary academic backgrounds,spanning control technology, AI software development and production engineering, enables
us to always bring our AI research fully into theindustrial context,” explains Felix Müller, chief
executive and cofounder of plus10.
In Japan, Hiroshi Iwamura, director of
the Tokyo office of Germany’s international
business promotion agency GTAI, spends a
lot of time talking to Japanese small and medium-sized businesses in the manufacturingsystems engineering sector, especially in automatization and robotics. He says that Japanese companies like Sumitomo are interested
not only in Germany’s huge market but also in
its excellent research and supportive cluster
landscape. “International companies can linkup with the top-notch research infrastructure
and use the know-how of research institutions
to develop their products,” Iwamura says.

CONTACT
peggy.goerlitz@gtai.com
GTAI expert for plastics
asha-maria.sharma@gtai.com
GTAI expert for AI

MARKETS GERMANY | Investors»THERE IS HUGE POTENTIAL FOR ­EXCHANGE,JOINT DEVELOPMENT
AND CONVERGENCE OF­INTERESTS.«
Grisha Alroi-Arloser, CEO of the German-Israeli
Chamber of Industry and Commerce (AHK Israel),looks back on how Israel weathered the corona
pandemic and considers what the future holds
for the long-established international partnership
between his nation and Germany.

Israel recovered from the pandemic shock
more quickly than other countries, mainly
thanks to its well-organized vaccine campaign. What impact did that have on theeconomy?
GRISHA ALROI-ARLOSER: Israel did get
through the first year of the pandemic decently
but at the cost of 26 percent unemployment,
lengthy lockdowns and grave downturns in
the tourism, restaurant, event and retail sectors. But because the high-tech sector was able
to adapt to the new world of work extremely
quickly, GDP as a whole only declined 2.2 percent. In 2021, Israel began the first vaccine
program worldwide and achieved 8.1 percent
growth, the highest rate in the OECD. Unemployment fell back down below 4 percent, andexports set a new record of USD 140 billion,
creating a trade surplus in the tens of billions.
How do Israelis view Germany as a businesslocation? How does your cooperation withGermany Trade & Invest help when you talkto Israeli companies about Germany?
Germany is Israel’s most important business
partner in Europe and is seen by the public asa reliable friend. More and more Israeli tech

CONTACT
alroi@ahkisrael.co.il
Grisha Alroi-Arloser, managing director German-Israeli Chamber of Industry and Commerce
gabriela.heinrichs@gtai.com
Executive Unit Strategic Partnerships (GTAI) andliaison to the German Chambers of Commerce
Abroadcompanies are looking to Germany as a target
market for strategic partnerships or as a gateway to the EU. GTAI advises our companies
comprehensively, answering questions about
employment, transport connections, the respective ecosystem, and funding opportunities. It also closely accompanies the process.
What kinds of Israeli companies are attracted to Germany? What industry expertisefrom GTAI is particularly helpful?
With its many languages and cultures, theEuropean continent is naturally a difficult
market to crack. Israeli start-ups in the areas ofcybersecurity, digital networking of industry,smart cities, mobility, e-health, and fintech
and insurtech have a growing interest in German partners – not just the corporate giants
but also increasingly SMEs. GTAI's expertiseis of great help to us, since we are of course
never as deeply involved in the local industries
as the customers expect. The division of labor
between AHK and GTAI therefore makes a
lot of sense.
Which sectors are ripe for collaboration?
Israel’s many companies offering data- andcybersecurity solutions have a vested interest
in finding partners, investors and customers
among manufacturers, governmental institutions, banks, insurance companies and criticalinfrastructure in Europe. The e-health andmobility sectors are also keenly interested inGermany because of its location, the size ofthe market and the high level of technology
there, combined with the country’s need toclose the digital gap.
The new German government has prioritized climate action and digitalization.
How has that been received in Israel?
The message has gotten through, and theIsraeli government has put the same goals
on its agenda. Rapprochement with our Arabneighbors has also opened up the path toward
contributing to global solutions. The newly
ratified German-Israeli Energy Partnershipis a clear sign. German delegations frompolitics and business are coming to Israel tolearn about the role of digitalization here in
public administration, production processes
and business models. There is huge potential
for exchange and joint development and aconvergence of interests.

Photo: Grisha Alroi-Arloser/private

34

MARKETS GERMANY | Investors

How Germany Works
THE AUTOBAHN
Germany’s Autobahn is one of thebest-known highway systems in theworld. It was first conceived in the
1920s and a prototype was finishedthe following year – Berlin’s Avus
racing stretch. Operations on thefirst true Autobahn began in 1932
on what is now the A555 between

Cologne and Bonn. Germany connects up western and eastern Europe: Some 1.3 million trucks use
its 13,000 kilometers of roads every
day, giving the country a major logistical advantage. It's also one ofthe densest controlled-access highway systems anywhere. These days,a recommended speed limit of 130km/h is in place (unless otherwise
signposted), and since 2005, a toll
system has been in place for HGVs
(average charge EUR 0.15 per km).
The Autobahn GmbH is a government-owned company overseen by
the Ministry for Digital and Trans-

port. It plans to invest EUR 5.7 billion in German highways by 2026.
That will include construction workon new roads and many of the network's roughly 40,000 bridges, aswell as digitalization. Mobility ischanging rapidly in Germany andthe highways must adapt with it.

CENTRAL EUROPE’S
INTERCHANGE
Germany’s highways give it a

HIGHWAY
HIGH ROLLERS

logistical advantage

Countries’ highway network lengths compared to their size (square area)

GERMANY
357,021

UNITED STATES
9,629,091

CHINA

1.3 M
trucks drive on the Autobahn
every day

9,706,961

33%
13,192

77,960SQUARE AREA IN KM

149,600

HIGHWAY NETWORK LENGTH IN KM

of them are from outside
Germany

THE AUTOBAHN INCLUDES

39,50017,000350

430

bridges

emergency phones

attended rest stops

gas stations

35

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