Intel Spends €33bn in Germany in Landmark Expansion

Intel will spend more than €30 billion to develop two chip-making plants in Magdeburg as part of its expansion push in Europe, a deal Chancellor Olaf Scholz hailed as Germany’s biggest ever foreign investment.

Berlin has agreed subsidies worth nearly 10 billion euros with the U.S. chipmaker, with more than the 6.8 billion euros it had initially offered Intel to build two leading-edge facilities in the eastern city.

Intel CEO Pat Gelsinger said he was grateful to the government and the state of Saxony-Anhalt, where Magdeburg is located, for “fulfilling the vision of a vibrant, sustainable, leading-edge semiconductor industry in Germany and the EU.”

Under Gelsinger, Intel has been investing billions in building factories across three continents to restore its dominance in chipmaking and better compete with rivals AMD, Nvidia and Samsung.

Scholz said, “this agreement is an important step for Germany as a high-tech production location – and for our resilience. With this investment, we are catching up technologically with the world’s best and expanding our own capacities for the ecosystem development and production of microchips.”

Globally, semiconductor manufacturing is expected to become a trillion-dollar industry by 2030, expanding from $600 billion in 2021, according to McKinsey.

Both the United States and Europe are trying to lure big industrial players via a mix of state subsidies and favourable legislation, with Germany concerned about losing appeal as a place to invest.

The government in Berlin is investing billions of euros in subsidies to lure tech companies, amid growing alarm over supply chain fragility and dependence on South Korea and Taiwan for chips.

Robert Hermann, CEO of government agency Germany Trade & Invest, said, “the size of Intel’s reaffirmed and increased commitment to its expansion in Magdeburg speaks louder than words about Germany’s appeal as a high-tech business location.”

Berlin is also talking with Taiwan’s TSMC and Sweden’s electric vehicle battery maker Northvolt about setting up production in Germany, having already convinced Tesla to build its first European gigafactory there.

Frankfurt-listed Intel shares were 0.3% higher at 1534 GMT.

This agreement includes what Intel said was increased government support, including incentives, reflecting the expanded scope of the project since it was first announced in March 2022.

Initially, Intel wanted to invest 17 billion euros in the Magdeburg plant, an amount that has nearly doubled to more than 30 billion.

Economy Minister Robert Habeck said, “this shows: Germany is a highly attractive location. We play at the forefront of global competition and secure sustainable and qualified jobs and value creation.”

The first facility in Magdeburg is expected to enter operation 4-5 years after the European Commission’s approval of the subsidy package, Intel said. About 7,000 construction jobs will be created in the first expansion, plus around 3,000 high-tech jobs at Intel and tens of thousands of jobs across industry.

Source: Reuters