Intel spends $33 billion in Germany in landmark expansion

 

Intel Spends $33 Billion in Germany for Groundbreaking Expansion

The Berlin government  is investing billions of euros in subsidies to attract tech companies amid growing concerns about supply chain fragility and  South Korea and Taiwan's dependence on chips.

Intel will spend more than 30 billion euros ($33 billion) to build two chip factories in Magdeburg as part of its European expansion. Prime Minister Olaf Scholz  on Monday called the deal the biggest  foreign investment in Germany's history.

According to sources familiar with the matter, Berlin has agreed to a subsidy of nearly 10 billion euros with the US chipmaker, which is more than the 6.8 billion euros it originally proposed for Intel to build two high-tech facilities in the eastern city.

Intel CEO Pat Gelsinger said, "We are grateful to the government and the state of Saxony-Anhalt, where Magdeburg is located, for embracing the vision of a dynamic, sustainable and advanced semiconductor industry in Germany and the EU."

Under Gelsinger's leadership, Intel has invested billions of dollars building factories across three continents to regain its chip-making dominance  and better compete with rivals AMD, Nvidia and Samsung.

"Today's contract is an important step for Germany  and for our sustainability as a state-of-the-art manufacturing facility," Scholz said after signing on Monday.

“With this investment, we are technologically catching up  with the world’s best and expanding our own capabilities for  ecosystem development and microchip production,” he said. 

 

 The German deal was Intel's third major investment in four days. On Friday, the company announced plans to build a $4.6 billion chip manufacturing plant in Poland, another EU member state, and Israel said  Sunday that Intel would spend $25 billion to build a plant there.McKinsey predicts that global semiconductor manufacturing will grow from a $600 billion in 2021 to a $1 trillion industry by 2030.

The United States and Europe are both trying to attract big business through subsidies and favorable legislation, and Germany fears it will lose its attractiveness as an investment destination.

The Berlin government is investing billions of euros in subsidies to attract tech companies amid growing concerns about supply chain fragility and South Korea and Taiwan's dependence on chips.

ATTRACTIVE LOCATION

"The scale of Intel's confirmed and increased commitment to expanding its presence in Magdeburg speaks volumes about Germany's attractiveness as a high-tech business location," said Robert Hermann, CEO of  Germany Trade & Invest, a state-owned agency. said. 

 

 Berlin is also negotiating with Taiwanese TSMC and Swedish EV battery maker Northvolt to start production in Germany, and has already convinced Tesla to build Europe's first gigafactory.

Shares of Intel listed in Frankfurt rose 0.3%  at 15:34 GMT. 

 

 Monday's deal included what Intel said had increased government support, including incentives that reflect the project's expansion since it was first announced in March 2022. 

 

 Initially, Intel wanted to invest 17 billion euros in the Magdeburg plant, and this amount almost doubled to more than 30 billion euros.“It shows that Germany is a very attractive place. We operate at the forefront of global competition, providing sustainable skilled jobs and value creation,” said Economics Minister Robert Habek.

Intel said it expects the first facility in Magdeburg  to be up and running in four to five years after the European Commission approves the grant package. 

 

 According to the US chipmaker, the first expansion will create about 7,000 construction jobs, about 3,000 high-tech jobs at Intel, and tens of thousands of jobs in other industries.

Last year, Intel announced plans  to build large chipsets in Germany and facilities in Ireland and France  to take advantage of easier  funding rules and subsidies from the European Commission. The EU is trying to reduce its dependence on US and Asian chip supplies. 

 

 Gelsinger  told Reuters on Friday that the gap between what Germany was offering for the subsidy and what Intel needed was too large, but added that his request was to make it cost-competitive and said he was waiting to reach an agreement.