UPDATE Intel (NASDAQ: INTC) will spend $33 billion to develop two chip-making plants in Magdeburg, Germany as part of its expansion push in Europe. Chancellor Olaf Scholz hailed the deal as the country’s biggest ever foreign investment, according to Reuters.
The German deal marks Intel’s third big investment in four days. It unveiled plans on Friday for a $4.6 billion chip plant in Poland, another European Union member, Inside Towers reported. Israel said on Sunday that Intel would spend $25 billion on a factory there.
Berlin has agreed to subsidies worth nearly $10.9 billion with the U.S. chipmaker, a person familiar with the matter said. That’s more than the $7.4 billion it had initially offered Intel to build two facilities in the eastern city.
Intel CEO Pat Gelsinger said he was grateful to the government and the state of Saxony-Anhalt, where Magdeburg is located, for “fulfilling the vision of a vibrant, sustainable, leading-edge semiconductor industry in Germany and the EU.” Under Gelsinger, Intel has been investing billions in building factories across three continents to restore its dominance in chipmaking and better compete with rivals AMD (NASDAQ: AMD), Nvidia (NASDAQ: NVDA) and Samsung (NASDAQ: SSNLF).
“Today’s agreement is an important step for Germany as a high-tech production location – and for our resilience,” Scholz said. “With this investment, we are catching up technologically with the world’s best and expanding our own capacities for the ecosystem development and production of microchips.”
Globally, semiconductor manufacturing is expected to become a trillion-dollar industry by 2030, expanding from $600 billion in 2021, according to McKinsey. Both the United States and Europe are trying to lure big industrial players via a mix of state subsidies and favorable legislation. Germany is concerned about losing appeal as a place to invest, notes Reuters.
The government in Berlin is investing billions of euros in subsidies to lure tech companies, amid growing alarm over supply chain fragility and dependence on South Korea and Taiwan for chips. Berlin is also talking with Taiwan’s TSMC (NYSE: TSM).
Monday’s agreement includes what Intel said was increased government support, including incentives, reflecting the expanded scope of the project since it was first announced in March 2022. Initially, Intel wanted to invest $18.5 billion in the Magdeburg plant, an amount that has nearly doubled to more than $32 billion.
The first facility in Magdeburg is expected to enter operation 4-5 years after the European Commission’s approval of the subsidy package, Intel said. About 7,000 construction jobs will be created in the first expansion, plus around 3,000 high-tech jobs at Intel and tens of thousands of jobs across industry, the U.S. chipmaker said.
Intel announced plans last year to build a big chip complex in Germany and facilities in Ireland and France as it seeks to benefit from easier European Commission funding rules and subsidies. The EU is trying to reduce its dependence on U.S. and Asian chips supply.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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