Intel Seeks $5 Billion More In Subsidies For German Chip Plant – Report

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

Bloomberg reported, citing people familiar with the matter, that Intel is seeking an additional 4 billion to 5 billion euros ($5.28 billion) in subsidies from the German government to build a chip manufacturing complex in the country.

Intel had already reached deal for $7 billion in aid, after it was reported last month that the chip maker had increased the amount of state aid it is seeking from the German government, with new calculations showing it needed almost 10 billion euros ($10.74 billion) of government funding.

Seeking subsidies

Intel has made it clear right from the start that subsidies would be required for it to build a chip factory in Europe.

In September 2021 CEO Pat Gelsinger said Intel could potentially invest as much as 80 billion euros ($95bn or £69bn) 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.

Magdeburg factory

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.

Intel reportedly said in a statement disruptions in the global economy have resulted in increased costs, but 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 was expecting roughly 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.

The expansion in Ireland and France, meanwhile, remains largely on track, the people told Bloomberg News.