Big bucks: Scholz (standing, right) and Gelsinger (left) attend the signing with Kukies (seated, right) and Esfarjani. Under the deal for a new chip-making complex on German soil, Intel will invest billions helped by subsidies from the German government. — Reuters
BERLIN: Germany and Intel Corp sealed an agreement for the US company to receive an enlarged subsidy package worth about €10bil (US$10.9bil or RM50.4bil) for a semiconductor facility in the former communist east, according to people familiar with the deal.
Intel confirmed the agreement on Monday without providing a specific amount for the financial aid. It said it plans to invest around €30bil (RM152bil) in the “leading-edge wafer fabrication site” in Magdeburg, which Chancellor Olaf Scholz said represents “the single largest foreign direct investment in German history”.
Together with Intel’s facilities in Ireland and Poland, the new site, which will consist of two fabs and be called “Silicon Junction”, will create an end-to-end semiconductor manufacturing infrastructure, supporting the European Union’s (EU) push for a more resilient supply chain, Intel said in a statement.
The first facility is expected to enter production in four to five years following European Commission approval, it added.
“The agreement is an important step for Germany as a high-tech production location – and for our resilience,” said Scholz, who attended a signing ceremony for the deal at the chancellery in Berlin together with Intel chief executive officer Pat Gelsinger.
The agreement was inked by Scholz’s top economic adviser, Joerg Kukies, and Keyvan Esfarjani, Intel’s executive vice-president, chief global operations officer, and general manager of manufacturing, supply chain, and operations.
Intel bought the land for the project in late 2022 and initially agreed to build the facility with €6.8bil (RM34.4bil) in government aid, but postponed the start of construction due to economic headwinds.
The enhanced package now agreed upon will include both traditional aid in the form of financial subsidies as well as price caps on energy, according to the people.
Intel said the site is expected to create 7,000 construction jobs during the initial construction phase, as well as around 3,000 permanent high-tech jobs and tens of thousands of additional positions “across the industry ecosystem”.
Under Gelsinger, Intel has embarked on a huge expansion programme aimed at recapturing its previous dominance of the industry and diversifying manufacturing hubs for critical components, currently concentrated in East Asia.
Magdeburg was a key part of those plans after it outbid other sites in Europe, but the project foundered after energy prices soared along with the costs of construction and materials.
Like most projects that will receive government funding through the EU’s Chips Act, Intel was expecting roughly 40% of its costs to be subsidised, the people said.
Intel’s investment is just the latest in Germany by a tech giant, following major projects launched by chipmaking rivals Infineon Technologies AG and Wolfspeed Inc, and may not be the last, according to Scholz.
“Others are waiting in the wings,” the German leader said in a speech on Monday at a business lobby conference in Berlin.
“If they are implemented – and we are working on this – Germany will become one of the world’s major semiconductor production locations,” he added.
“Such investments will diversify our supply chains and enable German and European companies to source the chips they need in the EU.”
Taiwan Semiconductor Manufacturing Co, the world’s biggest contract chipmaker, is in talks to get German government subsidies for as much as half of the cost of a plant in Dresden that could cost as much as €10bil (RM51bil), people familiar with the matter said last month. — Bloomberg
