Sanchez Wants Telefonica to Back Spain’s Semiconductor Goals

Spanish Prime Minister Pedro Sanchez said he hopes that Telefonica SA’s new management will take the company in a different direction and help to develop his country’s semiconductor industry.

Author of the article:

Bloomberg News

Rodrigo Orihuela and Thomas Gualtieri

Published Jan 22, 2025  •  3 minute read

Pedro Sanchez during an interview at the World Economic Forum in Davos, on Jan. 22. Photographer: Hollie Adams/Bloomberg Photo by Hollie Adams /Bloomberg

(Bloomberg) — Spanish Prime Minister Pedro Sanchez said he hopes that Telefonica SA’s new management will take the company in a different direction and help to develop his country’s semiconductor industry. 

Article content

Article content

“Telefonica has a major role to play in different aspects of our economy,” Sanchez said in an interview with Bloomberg TV’s Francine Lacqua at the the World Economic Forum in Davos on Wednesday. “Regarding the semiconductor industry and the digital economy, of course I think it could play a very important role.”

Article content

Telefonica’s new chairman, Marc Murtra, is settling into his role this week after Sanchez pushed out his predecessor, Jose Maria Alvarez-Pallete in a shock move over the weekend. The 52-year-old premier had grown frustrated with Pallete’s reluctance to invest in new technology and innovation, according to people familiar with his thinking. 

The government owns 10% of Telefonica and allied with industrial holding company Criteria Caixa SA, which controls a similar stake, to ask Pallete to step down. Murtra is a former Socialist government official close to Sanchez who was previously chairman of state-backed defense firm Indra Sistemas SA.

“We’re very excited and confident with the new team,” Sanchez said, adding that business strategy would be decided by the company. 

Sanchez also defended his decision to propose a 100% tax on non-residents from outside the European Union buying houses in Spain, arguing that investment flows show that foreign investors are confident in the country’s economic prospects.

“Spain is facing a critical housing situation,” he said. “What we need is more affordable housing and fewer airbnbs.”

Article content

Article content

Spain is expected to post the largest economic expansion among big European countries for a second consecutive year in 2025, boosted by record tourism and increasing exports. The nation has benefited from relatively cheap power prices due to a combination of renewable energy production and a large capacity to process liquefied natural gas.

At the same time, Sanchez is juggling a fragile coalition and struggling to push through even basic legislation such as a 2025 budget. Last week, a key ally said it was withdrawing support.

In an effort to modernize the Spanish economy, Sanchez has set aside €12 billion ($12.5 billion) from the European Union’s post-pandemic recovery funds for the development of a domestic semiconductor industry, but has struggled to attract the large investors he needs to help execute his strategy. 

Europe, Outgunned

Governments across the European Union have found it tough to persuade chipmakers to invest even with the promise of massive subsidies. Intel has halted plans for a €30 billion plant in Germany and postponed development of a Polish plant, while a €7.5-billion joint venture of autochip maker ST Microelectronics and GlobalFoundries in France is also on hold.

Article content

Even with those subsidies, the EU is outgunned by the $142 billion that China has allocated to semiconductors, while the US offers tax cuts in its Inflation Reduction Act and $39 billion of aid via its CHIPS Act.

At Davos, Sanchez finds himself as part of a shrinking number of left-leaning European leaders who stand at odds with the policies of US President Donald Trump and his allies in the region. One clear point of tension is with the new US administration’s hawkish approach to China.

In his push to attract investment, Sanchez has been reaching out to Beijing in recent years and said that Europe needs the Asian nation as a “strategic partner.” Carmaker Chery Automobile Corp recently opened a plant in the country and battery maker Contemporary Amperex Technology Co. Ltd. announced that it’ll also build one in a venture with Stellantis NV.

“We’re open for business for many countries — of course China,” he said. “Because we want to have the best relationship with a very important country and a very important economy globally.”

(Updates with comments on housing in seventh paragraph)

Article content