Published in PC Hardware

Intel holding Germany to ransom

by on09 March 2023

Give us more subsidy or we will take our foundry somewhere else 

Intel is seeking to extract more financial subsidies for its German factory, whose construction is currently on hold.

Bloomberg reported that Intel is seeking an additional 4 billion to 5 billion euros in subsidies from the German government to build a chip manufacturing complex in the country.

This is on top of the $7 billion which the Germans had already agreed to pay. Intel claims that its new calculations showing it needed almost 10 billion euros of government funding.

In September 2021 CEO Pat [kicking] Gelsinger said Intel could potentially invest as much as 80 billion euros to expand chip production in Europe.

It came after the European Union in March 2021, under its 2030 Digital Compass plan announced it wanted to produce at least 20 percent of the world’s cutting-edge semiconductors by the end of the decade.

To help achieve this goal, the European Commission in February 2022 officially proposed easing state aid rulings to help countries offer financial incentives for the building of chip factories.

The proposal, known as the ‘European Chips Act’, was touted as a way to bolster Europe’s self sufficiency in the semiconductor sector, by easing state aid rules, improving tools to anticipate shortages and crisis, and strengthen research capacity in the bloc.

Then in March 2021 Pat Gelsinger stated Intel was seeking 8 billion euros (£7bn) in public subsidies for its planned semiconductor plant in Europe.

In March 2022, Intel confirmed it would build a chip factory in Germany, which it had previously agreed to build with 6.8 billion euros ($7.2 billion) in government aid.

At the time Intel in its announcement said it would invest an initial 17 billion euros into a leading-edge semiconductor fab mega-site in Magdeburg, and would also create a new R&D and design hub in France.

In addition to all this, Intel will invest in R&D, manufacturing and foundry services in Ireland, Italy, Poland and Spain.

Intel had opted for the east German city of Magdeburg as the location of its new multibillion-euro European chip factory, but the chip maker postponed the start of construction at the plant because of economic uncertain and downturn, and began seeking more funds.

As you might expect, Chipzilla is blaming global headwinds for the next for extra cash. Global headwinds is the most often cited excuse touted by companies lately. Intel claims it is committed to the project and appreciates “the constructive dialogue with the federal government to address the cost gap that exists with building in other locations.”

Intel apparently expected 40 percent of its Germany project (thought to cost 30 billion euros) to be subsidised, under the EU’s Chips Act, but is now also open to other sources of government aid including tax breaks or energy subsidies, the report added.

When you are talking about billions like that, we would have thought it would have been cheaper for the EU to obtain "chip independence" by building its own foundaries and telling Intel to go forth and multiply. 


Last modified on 09 March 2023
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