US chip manufacturer: Federal government wants to support Intel factories with almost 10 billion euros

2023-06-19 18:53:14

US chip manufacturer Bund wants to support Intel factories with almost 10 billion euros

Intel CEO Pat Gelsinger (l) and Federal Chancellor Olaf Scholz before the signing of an agreement between the Federal Government and Intel. photo

© Carsten Koall/dpa

Europe wants to become more independent of Asia when it comes to chip production. An important step: Intel settled in Magdeburg. For this, the federal government digs deep into your pocket.

Federal Chancellor Olaf Scholz speaks of the largest foreign direct investment in German history. The US chip giant Intel wants to build factories in Magdeburg for 30 billion euros. “With this investment, we are catching up with the world leaders in terms of technology,” emphasized Scholz. Perhaps even more important: Germany could become less dependent on supply relationships with Asia. This is of great value to the federal government: it contributes around a third of the sum in the form of subsidies.

For months, there had been a hard struggle behind closed doors in Berlin. Intel announced in March 2022 that chips would be produced in the state capital of Saxony-Anhalt from 2027 and that two semiconductor plants would be built for this purpose. Several thousand jobs should be created. But a lot has happened since then: the war in Ukraine, the energy crisis and inflation made some doubt whether the US company would back down if government aid was not enough.

Since Monday, a decisive step has been taken: the agreement between the federal government and the company is in place. Instead of the previously promised 6.8 billion euros from the federal government, according to dpa information, 9.9 billion euros are now to flow.

Magdeburg, Dresden, Breslau and Ensdorf instead of Asia

The green light from Brussels is still missing for implementation, but there is optimism in Germany. The European Union wants to become technologically more independent of Asia when it comes to chip production. Subsidies worth billions should enable international manufacturers to settle in Europe.

In Dresden, for example, Infineon wants to expand its production facility and create around 1,000 new jobs. Intel wants to build a chip factory in Wroclaw, Poland, in which microprocessors will be assembled and tested. The US company Wolfspeed wants to set up a modern chip factory in Ensdorf in Saarland.

In Magdeburg, in addition to two semiconductor factories, a high-tech park is also planned for the settlement of suppliers. According to company boss Pat Gelsinger, around 3,000 high-tech jobs are to be created at Intel itself, plus several tens of thousands at suppliers and associated industries.

In Berlin, Gelsinger spoke of an important step towards a balanced and resilient supply chain for Europe. Production in Saxony-Anhalt should start in four to five years. “Intel’s investment will raise semiconductor production in Germany to a new level and is an important contribution to growing European sovereignty,” emphasized Economics Minister Robert Habeck (Greens).

record investments

Not only is funding from the federal government being increased, the US group is also spending significantly more money on its German plants than initially planned. In 2022, Intel had given the investment sum for Magdeburg at around 17 billion euros. In the meantime, however, construction and energy costs have increased. In addition, the company has now pledged to use an even more advanced chip technology that is used in the latest smartphones and computers.

This results in total costs of around 30 billion euros – including funding. A record sum. For comparison: the 17 billion euros would have been about three times as much as the car manufacturer Tesla invested in Brandenburg.

All in all, Intel is almost doubling its investments, according to government circles. State funding is to increase by a good three billion. This reduces the relative share of funding from the federal government: originally the government would have contributed 40 percent of the investment volume, now it should be around 33 percent.

Criticism of high funding

The amount of state aid is controversial among experts. Sharp criticism has recently come from the IWH economic research institute. IWH boss Reint Gropp advocated promoting research and development at universities and research institutes as well as in companies instead.

In the federal government, Habeck in particular had campaigned for higher subsidies to make the settlement possible. Finance Minister Christian Lindner (FDP) emphasized several times that there was no more money in the federal budget.

Now, according to reports, the additional funds are not to come from the regular budget, but from a special pot. According to initial information, this is the climate and transformation fund, from which the federal government pays for projects for more climate protection and the transformation of the economy. However, subsidies for the heating exchange that has just been decided and various other projects are also to be raised from the same pot.

While the start of construction in Magdeburg was originally planned for the first half of 2023, it could actually start in 2024. Archaeological investigations and preparatory work for the construction are currently being carried out on the site.

dpa