Limited access to chips makes it difficult to attract an AI Gigafactory to Portugal
Brussels recognises that restrictions on Portugal's access to chips are "relevant practical considerations" for any tech project, but admits that the country also has other points in its favour.
Portugal is at a disadvantage in the race for new artificial intelligence (AI) gigafactories. The European Commission admits that the restrictions imposed on the country by the US, which limit access to the processors needed to train and use AI models, are “relevant practical considerations” for any major technological project and could therefore jeopardise the feasibility of assessing a possible national application. However, Brussels also admits that Portugal has “important” positive aspects, which is why it encourages the submission of applications.
Ursula von der Leyen’s team wants to make it possible to build at least five AI gigafactories in the European Union (EU) with subsidies and other support, under a public-private partnership system. Until 20 June, a non-binding market consultation is underway to gauge the interest of private consortia in bringing this ambitious initiative to fruition. Investors with deep pockets will be needed, as each gigafactory will require an investment of between three and five billion euros, the European Commission estimates.
These AI Gigafactories “will be large-scale facilities dedicated to developing and training complex AI models with hundreds of billions of parameters”, and will have more than 100,000 advanced AI processors each. However, in January, Portugal was subject to new restrictions on the purchase of advanced AI processors by the previous US administration. The decision will still be re-evaluated, as ECO reported in April, but it could jeopardise a possible Portuguese bid, as, if confirmed, the country will be prevented from buying more than 50,000 processors for a period of two years.
Portugal’s disadvantage is further exacerbated by the fact that member states such as Spain, France and Italy have escaped this limitation. Asked whether the limitations imposed by the US represent a potential disadvantage for bringing an AI gigafactory to Portugal, given that the US company Nvidia manufactures the most advanced AI chips on the market, an official Commission source is concerned about the matter and signals that it does, although he emphasises that this should not discourage any application from the outset.
“The evaluation of proposals during the future official call will be based on intrinsic merits as defined at that time. Although external factors such as access to the supply chain are relevant practical considerations for any major technological project, they do not prevent any member state from participating in this initial exploratory phase,” an official European Commission source told ECO.
The same source also explains that there is no definite location at the moment. “Ultimately, the selection in the formal tender will be based on the overall merit and viability of the proposals submitted, not just on the proposed location”, he says, while recognising that “the location itself will be an important element to be considered in the context of each proposal”. But there are no “country quotas” or any geographical criteria to be considered at the moment, assures the European Commission. Basically, “many other criteria will be taken into account” in addition to the country of application, it adds.
US restrictions scare off investors
Portugal had been attracting interest from foreign investors in the area of data centres due to the availability of affordable renewable energy and its proximity to submarine cables. And these factors could end up favouring Portugal: “Parameters such as access to renewable energy and a robust connectivity network are undeniably important for large-scale infrastructures such as AI Gigafactories and will be relevant elements within the detailed proposals to be evaluated at a later stage”, the EU Executive assures ECO.
However, there is already an example of how the negative impact of US restrictions could end up outweighing all the other positive aspects of the country. Last week, Merlin Properties, a Spanish property developer that is building a data centre in the Lisbon region — in Castanheira do Ribatejo, in the municipality of Vila Franca de Xira — together with a US company, Edged Energy, decided to cut the infrastructure’s capacity to a third of what was initially planned.
As if that weren’t enough, the reduction in Merlin’s ambition in Portugal will be offset by a reinforcement of the company’s commitment in Madrid, a competing market. “We took away 72 MW [megawatts] that we were going to install in Portugal and added 78 MW to the assets located in Madrid”, said Merlin’s CEO Ismael Clemente at the general shareholders’ meeting, quoted by the Spanish press.
The European Commission also has “strong concerns about the potential negative effects” of the US clampdown on chip exports, as these components “enable the development of cutting-edge AI applications and systems”. “The EU and its member states have a legitimate interest in developing safe, resilient and reliable AI for the benefit of our citizens and economy”, an official source told ECO.
“We believe that it is also in the US interest, from an economic and security point of view, for the EU to buy advanced AI chips from the US: we co-operate closely, particularly in the field of security, and we represent an economic opportunity for the US, not a security risk. These restrictions are also a potential impediment to co-operation in AI and its applications between US and EU companies and research institutions”, points out Brussels, so the Commission looks forward to discussing this issue “constructively” with the new Trump administration, after having already presented ’its concerns” to the US authorities.
After the declaration of interest period for attracting AI Gigafactories, the European Commission will discuss with the interested consortia and further develop the proposals, which at this stage already require a certain level of detail, including an analysis of the target customers and labour requirements. The Commission then hopes to be able to officially launch the call for proposals at the end of this year.
For now, at least, PortugalDC, an association that represents more than a hundred entities linked to the data centre sector, is making preliminary efforts to try to mobilise a national application, in response to a challenge launched by the CEO of Banco de Fomento, Gonçalo Regalado, during a meeting with the association at the Ministry of Economy. Contacted last month, Banco de Fomento has not yet given ECO any response on the matter.
