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Intel has asked the German economy minister for more subsidies to build a giant chip factory in Magdeburg, Germany. Partly due to changing economic and geopolitical conditions, building this factory would be more expensive than planned. This reports the German business newspaper Handelsblatt.

According to the German business newspaper, the U.S. chip giant wants an additional 3.2 billion euros in subsidies from the German government to build the mega-plant. This additional amount is to be added to the already pledged support totaling 6.8 billion euros, This would bring German government support to 10 billion euros.

As the main reason for the additional subsidy request, Intel says that much has changed since the project was announced last March. Geopolitical challenges have increased, inflation has risen sharply and a global recession is underway. Intel itself has also seen its own revenues decline significantly due to disappointing demand for processors, among other things.

Rising construction costs

In early 2022, the chip giant announced the opening of a giant chip factory in Magdeburg, Germany. This should be operational by 2027 and the chip giant will manufacture the most advanced Intel processors there. Construction work should start in the first half of this year.

The cost of building this factory was initially estimated at 17 billion euros. Late last year it already became clear that these costs will be higher, at about $20 billion. Mainly because of these increased construction costs, the chip giant is requesting the additional subsidy from the German government.

More chip factories under pressure

Not only the costs of the German Intel megachip plant are under pressure, The Register writes. Also in the United States itself, in the state of Arizona, the cost of building two Intel chip factories is rising. Whereas in 2021 these costs were estimated at $10 billion apiece, a year later they had risen to $15 billion. For this, the chip giant had to raise additional capital through a private investment company.

Furthermore, building a packaging plant in northern Italy would be on the back burner and the chip giant has indicated it will not invest in Vietnam for the time being. For this Asian country, Intel was expected to build chip factories there as well.

Tip: Intel is going to build huge chip factory in Magdeburg