Saxony has several major semiconductor fabs in dense proximity – Infineon, GlobalFoundries, Bosch and Jenoptik. ESMC, a TSMC-led joint venture with Bosch, Infineon and NXP, backed by €5 billion in German federal funding, is expected to begin operations from 2027. Every third chip produced in Europe is Made in Saxony. The fabs are the visible part but the microelectronics cluster has 3,650 companies and employs 83,000 people across the value chain.
Industrial agglomeration has many benefits: a deep labour pool, specialised suppliers, and knowledge spillovers. All three operate in Dresden. Workers move between GlobalFoundries, Infineon and Bosch, carrying tacit process knowledge in their heads. Equipment suppliers and industrial-gas providers operate at scale because there are enough buyers within driving distance. Fraunhofer institutes and TU Dresden train engineers who can walk to their next job. A “Made in Saxony” reputation signals quality to international buyers without any individual firm having to spend on the branding.
The result is non-linear. The second fab values the talent pool the first one created; the third values the suppliers the first two attracted; the fourth comes for the brand. Clusters are sticky in a way single firms cannot be, because what makes it work is a web of relationships that have strengthened over decades.
India has its own clusters. Tamil Nadu is a manufacturing hub for automobiles and electronics. Bengaluru, Hyderabad, Pune, Chennai, and Delhi-NCR have GCC clusters. Each generates agglomeration benefits at its own scale. It is fascinating to observe what cluster economics delivers when you let them compound over decades. From a talent and supplier ecosystem the compounding returns can evolve into a brand. Their value value grows non-linearly with each addition.