Intel stands by record semiconductor investment despite German budget problems

9 months ago 25

Intel is sticking to its plans to build a €30 billion chip factory in Germany, despite some uncertainty over state subsidies for the project after the Constitutional Court ‘threw a spanner in the works’ of the government’s budget plans.

The deal marked the largest single foreign direct investment in European history, as Intel planned to invest €30 billion in return for €10 billion in government subsidies.

“We are determined to go ahead with our project in Magdeburg [Germany] as planned”, Intel’s board member overseeing the project, Keyvan Esfarjanai, told FAZ on Monday, saying that it would be costly and difficult to stop it now.

In the first step, the project will see the construction of two chip plants in Magdeburg. The deal fell in line with several investments by chip manufacturers, including Infineon, Wolfspeed and the first-ever plant of Taiwanese giant TSMC in Europe, which German Economy Minister Robert Habeck called “proof” of Germany’s competitiveness.

But state aid earmarked for the mega project was called into question last month when Germany’s constitutional court declared the government’s use of several special funds unconstitutional.

“Of course, we recognise the budget problems that Berlin is currently facing, but we are very confident that the hurdles will be overcome”, Esfarjanai said, adding that the company was working closely with the German federal and state governments.

Intel’s reassurances are welcome news for Berlin as the development was deemed a flagship project for both the economic recovery of eastern Germany and government plans to attract future-oriented industries and strengthen the resilience of its economy.

After months of negotiations, the two sides finally signed off on the project in June in the presence of Chancellor Olaf Scholz and Intel CEO Pat Gelsinger.

While construction works are scheduled to start at the end of 2024, with preliminary work already underway, production will begin as soon as 2027.

Last week, Scholz rushed to reassure manufacturers about the subsidies, asserting that “large projects that we have planned will go ahead and have to go ahead”.

Approximately three-quarters of Intel’s earmarked funding has already been secured, leaving only €2.3 billion uncertain for now, FAZ reported.

(Nick Alipour | Euractiv.de)