Intel’s plan to build a giant chip fab in Magdeburg, Germany, is arguably at the heart of the EU’s strategy to boost domestic semiconductor production.
But the cash flow is proving to be a major stumbling block for the mega project. Intel attributes this to rising costs, in part due to the Russian invasion of Ukraine.
In order to close the financing gap, the US semiconductor giant helped out last month requested an additional €4-5 billion euros in subsidies to build the plant.
But German officials want Intel to meet them in the middle — they will consider increasing subsidies, but only if the company is willing to spend more on infrastructure.
“It is logical that with an increase in the investment volume, the amount of funding also increases,” says Sven Schultze, Economics Minister of the State of Saxony-Anhalt. told The financial times.
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Intel had initially estimated the cost of the project at 17 billion euros and agreed on 6.8 billion euros in government subsidies. However, the company now expects to spend 20 billion euros, citing rising energy and construction costs.
The chip factory has already been built delayedand resolving the funding dispute will be crucial if Intel is to implement its broader plans to invest €80 billion in the EU’s semiconductor industry over the next decade.
While it might seem easy to throw a few billion more into the project, the chipmaker faces serious cash flow problems. Late last year, Intel CEO Pat Gelsinger said the company would do so cut up to $10 billion in annual spend by 2025.
The German Ministry called Possibilities of closing the cost gap of the project are currently being discussed. It also added that any additional funding would likely need approval from the European Commission first.
Additional subsidies for the project could come from the European Chips Act, which aims to mobilize more than €43 billion to end Europe’s dependence on China and produce 20% of the world’s semiconductors by 2030.
The plot is expected to get the green light next week, which could throw Intel a crucial financial lifeline.
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