2023-06-19 15:31:37
The German federal government is ending the deadlock over Intel’s planned chip factory in Magdeburg with billions in subsidies. The US group is investing more than 30 billion euros in two so-called “megafabs” and creating around 3,000 highly qualified jobs in the long term, Intel explained on Monday.
This is the highest direct investment by a foreign company in the history of the Federal Republic, said German Chancellor Olaf Scholz following a meeting with Intel boss Pat Gelsinger. According to people familiar with the matter, the state is contributing ten instead of the originally promised 6.8 billion euros.
The level of subsidies was one of the sticking points in the negotiations. “We don’t ask for alms, we want to be competitive,” Gelsinger said on Friday. “Labor costs have increased significantly, material costs have increased significantly. The cost gap was suddenly larger than we originally thought.” In addition, according to information from Monday, more advanced chips than initially planned are to be produced in the factory. The plant will be the first of its kind in Europe.
Intel is not the only technology company that the German state is luring into the country with subsidies. The US group Wolfspeed is building a plant in Saarland for the equivalent of 2.75 billion euros. A new battery factory is to be built by the Swedish supplier Northvolt in Heide, Schleswig-Holstein. At the same time, the government is negotiating with the world’s largest contract manufacturer of chips, TSMC, regarding the construction of a new plant in Dresden.
If all planned projects were implemented, Germany would rise to become one of the world’s leading semiconductor producers, Scholz said at an event organized by the Federation of German Industries (BDI). Kurt Sievers, head of the chip manufacturer NXP, praised the initiatives at the same conference, but warned once morest one-sided funding of production facilities. “These factories can only be filled if the innovations are there.” The aim must be to create attractive framework conditions in the long term.
Because other states are also vying for the industry with billions in taxes. According to insiders, China wants to support the domestic industry with the equivalent of 136 billion euros. Japan and South Korea are planning something similar. The USA put together an investment package worth a good 52 billion dollars, the EU is countering this with its own program. The funding volume of the “Chips Acts” in the USA and the EU are similar, but decisions were made faster on the other side of the Atlantic, explained NXP boss Sievers. Too much time is wasted in the wrangling between Brussels and the member states.
Economists, on the other hand, questioned the subsidy race as such. “The money would definitely be better invested in education than for such prestige projects,” criticized Stefan Kooths, Vice President of the Kiel Institute for the World Economy (IfW). “Returns to education are incomparably higher than those of any physical capital investment.” In addition, the workplace argument is “window dressing”. Intel does attract well-qualified employees. But they would find somewhere else.
Clemens Fuest, head of the Munich Ifo Institute, described the subsidies as “questionable” in an interview with the Archyde.com news agency. It is unclear whether those chips for which there is a demand in Europe are also produced in Magdeburg. In addition, energy-intensive chip factories received double government aid through the industrial electricity price.
Intel is currently spending a lot of money to compete with competitors such as AMD, Nvidia and Samsung: In the past few days, the US company announced the construction of a $25 billion plant in Israel. “This is the largest investment ever made by an international company in Israel,” said Israeli Prime Minister Benjamin Netanyahu. Intel also wants to invest around 4.6 billion dollars in Poland. A plant for testing and assembling processors is to be built in Wroclaw. The volume of this project is also a record in the country’s history, explained Polish Prime Minister Mateusz Morawiecki.
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