2 min

Intel and the German government are close to a deal on additional funding for the tech giant’s local facility. The German newspaper Handelsblatt has reported that the final round of negotiations is underway.

After months of negotiations, the German federal government is about to increase state funding for Intel’s chip factory in Magdeburg. This is according to a report in the Handelsblatt.

The US chipmaker now stands to receive 9.9 billion euros in subsidies. That figure is up from a previously agreed 6.8 billion. The extra money, like the original funding, will come from “various sources”, including the European Chips Act.

The Handelsblatt sources say that negotiations will likely drag on through the weekend. However, an announcement could be made as early as Monday.

Under CEO Pat Gelsinger, Intel has embarked on a massive build-out to regain its leadership position and diversify manufacturing bases for critical components, which are currently concentrated in East Asia. The Magdeburg was a central part of the company’s expansion plan.

Nearing the end of a rocky road

Inflation in construction and material costs have called the strategy into question again, according to the article. Intel also cited “volatile energy costs” as a reason for the request for more money. The original €6.8 billion deal was negotiated in June 2022, before the destruction of the Nord Stream 2 gas pipeline sent German energy prices skyrocketing. This caused Intel to put brakes on the deal back in December.

An additional 3.1 billion euros in government funding could overcome Intel’s reluctance.

Differing opinions emerge in Berlin

The subsidy bump was strongly supported by German Economy Minister Robert Habeck, who was critical to arranging the extra money and convincing Intel to move forward again. Habeck sees the Magdeburg facility as a big boost for Germany’s digital transformation efforts, and as a way to safeguard German “economic sovereignty”. But the increased expenditure faced resistance from Germany’s Finance Ministry, led by Christian Lindner, Handelsblatt says.

Now it seems that Habeck has won out. Intel will get the money it needs to settle in Magdeburg, a historic city located along the Elbe river in the German state of Sachsen-Anhalt.

According to reports, one of the conditions for the deal will be that Intel must increase its investment in the factory beyond than the original €17 billion forecast. This is undoubtedly one of the points the two sides will hammer out over the weekend.