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Intel Commits €30 Billion to Build Chip-Making Plants in Germany

Intel's investment of €30 billion in Magdeburg chip-making plants highlights Germany's push to regain high-tech dominance.

Credits: REUTERS

Intel has announced a groundbreaking decision to invest over €30 billion ($33 billion) in the development of two chip-making facilities in Magdeburg, Germany. This landmark deal, hailed as the largest foreign investment in the country by Chancellor Olaf Scholz, signifies Intel's strategic expansion efforts in Europe.

Germany's support for Intel's venture involves substantial subsidies amounting to nearly €10 billion, surpassing the initial offering of €6.8 billion for constructing cutting-edge plants in the eastern city. Expressing gratitude, Intel CEO Pat Gelsinger acknowledged the German government and the state of Saxony-Anhalt, home to Magdeburg, for realising the vision of a flourishing and sustainable semiconductor industry in Germany and the European Union (EU).

Under Gelsinger's leadership, Intel has embarked on a multibillion-dollar investment spree, establishing factories across three continents. This strategic move aims to reclaim Intel's dominance in chipmaking and enhance its competitiveness against formidable rivals such as AMD, Nvidia and Samsung.

Germany's high-tech production landscape is set to benefit significantly from this investment, fostering technological advancements and expanding microchip manufacturing capabilities. Chancellor Scholz emphasised that this move propels Germany forward as a high-tech production hub and reinforces its resilience.

Intel's deal with Germany marks the company's third major investment in four days. Last week, the company unveiled plans for a $4.6 billion chip plant in Poland, an EU member, while Israel confirmed that Intel would invest $25 billion in a factory there.

According to McKinsey, the global semiconductor manufacturing industry is projected to reach a trillion-dollar valuation by 2030, expanding from $600 billion in 2021. This exponential growth presents opportunities for both the United States and Europe, driving efforts to attract major industrial players through a combination of state subsidies and favourable legislation. Germany, in particular, is keen to enhance its appeal as an investment destination, as concerns grow regarding supply chain fragility and reliance on South Korea and Taiwan for chip supply.

In addition to the Intel investment, Berlin is engaging in discussions with Taiwan's TSMC and Sweden's electric vehicle battery maker Northvolt to establish production facilities in Germany. Tesla has already been convinced to construct its first European giga factory in the country.

As a result of the agreement, Intel's Frankfurt-listed shares experienced a 0.3% increase at 1534 GMT.

The agreement reached on Monday includes enhanced government support and incentives to accommodate the expanded scope of the project since its initial announcement in March 2022. The initial investment of €17 billion has nearly doubled to over €30 billion.

German Economy Minister Robert Habeck emphasised the attractiveness of Germany as a business location, stating that the country is at the forefront of global competition, securing sustainable jobs and value creation.

Intel anticipates that the first facility in Magdeburg will commence operations in four to five years after receiving approval from the European Commission for the subsidy package. The construction phase alone will generate approximately 7,000 jobs, with an additional 3,000 high-tech positions at Intel and numerous employment opportunities across various industries.

In an effort to reduce dependence on U.S. and Asian chip supplies, Intel announced plans last year to build a major chip complex in Germany, alongside facilities in Ireland and France. By leveraging European Commission funding rules and subsidies, the EU is actively working towards achieving greater autonomy in the chip industry.

Gelsinger expressed optimism about reaching an agreement, despite the initial discrepancy between the subsidies offered by Germany and Intel's requirements. He emphasised the need for cost competitiveness, underscoring the imperative to regain a competitive edge and revive the chip industry in Europe.

  • Intel commits over €30 billion ($33 billion) to construct two chip-making plants in Magdeburg, Germany.

  • Germany grants subsidies worth nearly €10 billion, making it the country's largest foreign investment.

  • Intel's strategic expansion aims to compete with rivals and restore its dominance in chipmaking.

  • Germany positions itself as a high-tech production hub, fostering technological advancement and microchip manufacturing.

  • The global semiconductor manufacturing industry is expected to reach a trillion-dollar valuation by 2030.

  • Germany seeks to attract major industrial players and reduce reliance on South Korea and Taiwan for chip supply.

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