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People familiar with the matter say that Germany and Intel Corp. reached an agreement for the US business to obtain an expanded subsidy package worth around €10 billion ($10.9 billion) for a semiconductor facility in the former communist east.
Intel announced the agreement on Monday without mentioning how much money will be provided. The “leading-edge wafer fabrication site” in Magdeburg will get almost €30 billion in investment, according to the company. According to Chancellor Olaf Scholz, this investment will be “the single largest foreign direct investment in German history.”
The new site, which will have two fabs and be called “Silicon Junction,” will work with Intel’s facilities in Ireland and Poland to build an end-to-end semiconductor manufacturing infrastructure, supporting the European Union’s push for a more reliable supply chain, according to a statement from Intel.
After receiving approval from the European Commission, the first facility is anticipated to begin production in four to five years.
“Today’s agreement is an important step for Germany as a high-tech production location—and for our resilience,” said Scholz, who joined Intel CEO Pat Gelsinger for the signing ceremony at the Berlin chancellery.
Joerg Kukies, Scholz’s senior economic advisor, and Keyvan Esfarjani, Intel’s executive vice president and general manager of manufacturing, supply chain, and operations, signed the contract.
In late 2022, Intel purchased the property for the project. Initially, Intel agreed to develop the facility with €6.8 billion in government assistance, but because to economic difficulties, Intel delayed the start of construction.
According to the sources, the improved package that has finally been agreed upon would contain both conventional aid in the form of financial subsidies and energy price restrictions.
The site is planned to generate 7,000 construction jobs during the initial development phase, as well as 3,000 permanent high-tech jobs and tens of thousands of additional roles “across the industry ecosystem.”
Under Gelsinger, Intel has started a massive expansion programme with the goal of regaining its prior industry supremacy and diversifying the manufacturing hubs for essential components, which are now primarily located in East Asia.
After outbidding other locations in Europe, Magdeburg was a crucial component of those plans, but the project failed as a result of the rise in energy prices, which also increased the cost of building and materials.
According to the sources, Intel anticipated receiving government assistance for about 40% of their costs, like the majority of projects funded under the Chips Act of the European Union.
Scholz claims that following substantial projects launched by chip rivals Infineon Technologies AG and Wolfspeed Inc., Intel’s investment is only the most recent by a global technology company in Germany.
The German chancellor stated in a speech on Monday at a business lobby conference in Berlin that “others are waiting in the wings.”
Germany will become one of the world’s key semiconductor production centres if they are adopted, and we are working on this.
Such investments will broaden our supply networks and make it possible for German and European businesses to source the chips they want from the EU.
The largest contract chip manufacturer in the world, Taiwan Semiconductor Manufacturing Co., is in discussions with the German government to receive financial assistance for a Dresden plant that might cost up to €10 billion, according to sources with knowledge of the situation last month.
