Berlin dangles greater subsidies if chipmaker agrees to increase its investment in the Magdeburg facility.
Germany is pushing Intel to expand its plans for a proposed chip plant in exchange for higher subsidies, according to a report in the Financial Times. The €17 billion is already set to be the country’s largest foreign direct investment (FDI) since the second world war, FT reports.
Under CEO Pat Gelsinger, Intel has embarked on an ambitious building campaign aimed at regaining its industry leadership. The German city of Magdeburg was a primary location choice after it outbid other sites in Europe – helped with a promise of receive €6.8 billion in subsidies from Berlin.
“Meeting halfway” on the funding mechanism
Intel, however, has been making it known that it wants more from the German government, perhaps as much as €5 billion in additional subsidies, citing higher energy and construction costs. FT reports that German officials have said they could increase the financial support only if the US chipmaker invested more in the Magdeburg facility.
Sven Schulze, economy minister of the eastern state of Saxony-Anhalt, of which Magdeburg is the capital, told Reuters: “It is logical that if the scale of the investment is increased, then the level of subsidy will also rise”.
Another German official added: “We need Intel to meet us halfway”.
Benefiting from the EU Chips Act
Berlin’s deal with Intel comes at a time when the Biden administration is offering chipmakers hundreds of billions of dollars in subsidies to increase manufacturing in the US. That has resulted in pressure on the European Union to match such efforts or see investment float away across the Atlantic. German officials say subsidies for Intel’s project are being provided under the provisions of the European Chips Act, which aims to mobilise more than €43 billion in public and private investments for Europe’s semiconductor industry.
That legislation, however, is still in the drafting stage, and Brussels still needs to confirm that Berlin’s offer of financial support complies with EU rules on state aid.
The German government and Intel “both declined to comment on any demands by Berlin for a higher level of investment”, according to FT.
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