‘Intel puts brakes on German chip factory’

‘Intel puts brakes on German chip factory’

Intel has stepped back from its original target of opening a chip factory in Germany’s Magdeburg in the first half of next year. The report comes from Volksstimme, a regional newspaper which said the chip giant wants more public subsidies.

The plant is critical to German and European Union initiatives to strengthen the bloc’s ability to supply itself with chips by boosting manufacturing after the COVID-19 pandemic and Russia’s invasion of Ukraine exposed cracks in global supply chains.

The German newspaper reported that rising material and energy costs have thrown a wrench in Intel’s original plan. According to the article, Intel initially budgeted to spend €17 billion ($18 billion), while costs are now approaching €20 billion.

“Geopolitical challenges have grown, and demand for semiconductors has fallen”, Intel spokesperson Benjamin Barteder said, according to the newspaper. “This means we cannot yet give a definitive date for the start of construction.” Intel added it’s in talks with the government about bridging the funding gap.

Intel’s record in Germany

The newspaper further quoted Intel as saying that the gap only recently emerged. Intel reportedly said it’s working with government partners to keep the project going, but did not immediately respond to a request for comment from Reuters.

When the project was announced, sceptics raised concerns, noting that Intel is years behind in introducing new technology and has yet to prove itself as a foundry business, a type of manufacturer that produces chips for third parties.

The company’s record in Germany is a mixed bag. About two decades ago, Intel joined a consortium for a chip factory in Frankfurt before writing it off while it was already under construction.