Intel desires one other 5 billion euros in subsidies for constructing a chip manufacturing unit in Germany

Under the Chip Law, the EU aims to end its dependence on China and produce 20% of the world’s semiconductors by 2030. Amid political pressures, a key strategy was to get global giants to invest in Union domestic manufacturing – with Intel’s plan to build a giant chip factory in Magdeburg, Germany seen as a major boost for the bloc.

But now Intel is asking the federal government for another €4 billion to €5 billion in subsidies to push the project forward, Bloomberg reports, citing people familiar with the matter.

In March 2022, Intel announced an initial investment plan of over €33 billion (which will reach €80 billion within the next decade) to strengthen the EU’s semiconductor industry across the value chain. These included the mega-site in Germany, a new chip research center in France, a back-end manufacturing facility in Italy and the expansion of the existing chip factory in Ireland, laboratory in Poland and supercomputing center in Spain.

Construction of the much-anticipated semiconductor fab in Magdeburg was postponed late last year due to economic hurdles caused by high energy prices and inflation following Russia’s war with Ukraine, the report said.

Artist’s impression of Intel’s chip factory in Germany. The factory is expected to create 3,000 high-tech jobs. Credit: Intel

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 is now expecting expenditures of 30 billion euros – and will therefore need further state aid. It is also open to tax breaks or energy subsidies.

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“Disruptions in the global economy have resulted in increased costs for everything from building materials to energy,” Intel said in a statement. “We appreciate the constructive dialogue with the federal government to close the cost gap that exists when building at other locations and to make this project globally competitive.”

According to Bloomberg, Intel is also expected to delay its project in Italy and is currently in talks with the Italian government. On the plus side, the research center in France and the expansion of the facility in Ireland appear to be on track.

EU Commission President Ursula von der Leyen described Intel’s investment as “the first major success” after the new chip law. “It is a significant contribution to the European chip ecosystem that we are building,” she commented after the tech giant’s announcement.

The continent’s weak position in the global semiconductor market has been particularly evident during the pandemic, showing that chips are an integral part of the EU’s digital and green transition, as well as its geopolitical agenda. But while the block has managed to attract a number of investors, it seems that fully implementing their project still remains a challenge.

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