Intel invests $33 bln in Germany for lucrative increases

Intel, the U.S. chipmaker, has announced a significant investment of over 30 billion euros ($33 billion) in the development of two chip-making plants in Magdeburg, Germany.

This expansion initiative in Europe has been hailed by Chancellor Olaf Scholz as the largest foreign investment in Germany to date.

To facilitate this project, Berlin has agreed to provide subsidies amounting to nearly 10 billion euros, surpassing the initial offer of 6.8 billion euros.

The German government’s support and the cooperation of the state of Saxony-Anhalt, where Magdeburg is situated, have been appreciated by Intel CEO Pat Gelsinger, who expressed gratitude for their role in realizing the vision of a thriving and sustainable semiconductor industry in Germany and the European Union (EU).

Under Gelsinger’s leadership, Intel has been actively investing billions of dollars in constructing manufacturing facilities across three continents in an effort to regain its dominance in the chipmaking market and enhance race against industry contenders such as Nvidia, AMD, and Samsung.

The agreement reached between Intel and Germany has been hailed as a significant step in establishing Germany as a high-tech production hub and strengthening its resilience.

Chancellor Scholz emphasized the technological advancements this investment would facilitate, enabling Germany to catch up with global leaders and expand its own microchip production capacities, thereby contributing to the growth of the ecosystem.

This deal with Germany marks Intel’s third major investment announcement within a span of four days. The company recently revealed plans for a $4.6 billion chip plant in Poland, an EU member state, and committed to investing $25 billion in a factory in Israel.

With the global semiconductor manufacturing industry projected to reach a value of one trillion dollars by 2030, up from $600 billion in 2021 according to McKinsey, both the United States and Europe are actively attracting major industrial players through a combination of state subsidies and favorable legislation.

Concerns over supply chain fragility and dependence on South Korea and Taiwan for chips have prompted the German government to invest billions of euros in subsidies to attract technology companies.

Additionally, Berlin is engaging in discussions with Taiwan’s TSMC and Sweden’s Northvolt, a manufacturer of electric vehicle batteries, to establish production facilities in Germany.

Furthermore, Germany has successfully convinced Tesla to construct its first European gigafactory in the country.

The agreement between Intel and Germany includes increased government support, such as incentives, which reflects the expanded scope of the project since its initial announcement in March 2022.

The investment commitment from Intel has grown from 17 billion euros to over 30 billion euros, highlighting the appeal of Germany as a highly attractive business location and its ability to compete globally, secure sustainable jobs, and foster value creation.

Intel anticipates that the first facility in Magdeburg will commence operations 4-5 years after receiving approval from the European Commission for the subsidy package.

The project is expected to create approximately 7,000 construction jobs during the initial expansion phase, along with around 3,000 high-tech jobs at Intel and tens of thousands of positions across various industries.

In its pursuit of European Commission funding rules and subsidies, Intel had previously announced plans to establish a large chip complex in Germany and facilities in Ireland and France.

This aligns with the EU’s objective of reducing its reliance on chip supplies from the United States and Asia.

Gelsinger acknowledged the initial disparity between the subsidies offered by Germany and Intel’s requirements, emphasizing the need for cost competitiveness. He expressed confidence in reaching an agreement, stating the importance of restoring the industry to Europe by being competitive in the global market.

In conclusion, Intel’s significant investment in chip-making plants in Magdeburg, Germany, represents a milestone in the country’s technological and economic advancement.

The collaboration between Intel and the German government showcases Germany’s appeal as a house capable of dealing with resources well.