Intel claims billion euros for its European factory

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Intel Corp. is seeking another €4 billion to €5 billion in subsidies from the German government to continue building a chip manufacturing complex in the east of the country.

The chip designer had already reached a deal to build a plant in Magdeburg with 6.8 billion euros ($7.2 billion) in government subsidies, subject to approval by the European Commission.

But it delayed the start of construction on the project until late last year because of headwinds in the economy and is now seeking additional aid, said the people, who asked not to be identified because the information is not public.

« Disruptions in the global economy have resulted in increased costs, from building materials to energy, » Santa Clara, California-based Intel said in a statement. « We appreciate the constructive dialogue with the federal government to close the cost gap that exists with construction in other locations and make this project globally competitive. »

Last year, Intel announced a massive expansion plan in Europe, worth 33 billion euros at the time, including a research center in France and an expansion of its chip manufacturing facility in Ireland.

Among these projects is the chip production site that Magdeburg is expected to host. Since the war in Ukraine broke out in early 2022, energy prices in Europe have been extremely volatile, reaching record levels last year. Inflation has also sent construction and materials costs soaring.

The German economy ministry declined to comment on its discussions with Intel but reiterated the EU’s goal of producing 20 percent of the world’s semiconductors by 2030.

« With this in mind, the federal government is prepared to support the semiconductor industry in Germany to the tune of several billion euros and enable the creation of new factories, » it said. The ministry said any additional funding would require approval from the European Commission.

Given the stakes, it seems likely that a compromise could be found, for example by including tax credits. As its rivals, Intel is indeed in a position of strength, while Europe and the United States want to boost their production of chips, for the moment mainly manufactured in Asia.

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