Intel is to ramp up its investment in two new semiconductor plants in eastern Germany from €17bn to €30bn in exchange for higher government subsidies for the project, the company said Monday.
The announcement marked the resolution of a dispute that broke out earlier this year when Intel demanded the government increase the level of financial support for the project from €6.8bn to at least €10bn, citing increased construction and energy costs.
Those demands sparked controversy in Germany, with some economists warning the incentives were a waste of taxpayers’ money and finance minister Christian Lindner, of the fiscally hawkish Free Democratic party, saying there was no more money in the budget for additional subsidies.
Intel’s planned leading-edge wafer fabrication site in Magdeburg, which it has nicknamed “Silicon Junction”, is the largest foreign investment in Germany’s history and is seen as pivotal to EU plans to double its share of the global semiconductor market from less than 10 per cent today to 20 per cent by 2030.
On Monday, Intel announced it had signed a revised letter of intent with the government that will expand its investment in the two new fabrication plants or fabs in the city to €30bn. It said it had also reached an agreement on “increased government support”, reflecting “the expanded scope and change in economic conditions since the site was first announced”.
Intel declined to say what the level of subsidy had risen to, but sources in the government said it now stood at €9.9bn.
The company said it planned to deploy more advanced “Angstrom era” technology in the facilities than originally envisioned. Angstrom era refers to the period starting in the mid-2020s when the elements of a transistor became smaller than one nanometre.
Last week, Intel also announced plans to build a $4.6bn semiconductor assembly and testing plant in Wrocław, Poland, which it expects it to be ready by 2027.
The company said that the Polish plant, combined with the factories in Magdeburg and its existing wafer fabrication facility in Ireland would create a “first-of-its-kind, leading-edge, end-to-end semiconductor manufacturing value chain in Europe”.
Intel chief executive Pat Gelsinger described the Magdeburg project as a “critical part of our strategy for Intel’s growth”. It would help create a “capacity corridor from wafers to complete packaged products that is unrivalled”.
Intel acquired the land for the Magdeburg project in November 2022 and the first facility is expected to enter production within four to five years after the subsidy regime is approved by the European Commission.
The site is expected to create 7,000 construction jobs during the first phase, about 3,000 permanent high-tech jobs at Intel and tens of thousands of additional jobs across the semiconductor industry ecosystem.
German chancellor Olaf Scholz said: “With this investment, we are catching up technologically with the world’s best.” Deputy chancellor Robert Habeck said Intel’s investment would “raise semiconductor production in Germany to a new level, and is an important contribution to growing European sovereignty”.
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