Germany to subsidize Intel €10B for 'Silicon Junction' fab

Plus: Taiwan dangles investment in semiconductor production in EU – but there's a catch

Intel has agreed a deal with the German government for €10 billion ($10.9 billion) in subsidies for a new chip plant in the country, despite Germany's finance minister saying just last week that it would not offer more cash.

The news comes hard on the heels of a new fab in Israel plus a facility in Poland for the company.

The German federal government and the Santa Clara chipmaker have signed a revised letter of intent regarding the planned wafer fabrication facility to be built at Magdeburg in the state of Saxony-Anhalt, Intel confirmed shortly before publication.

A rendering shows early plans for two new Intel processor factories in Magdeburg, Germany

A rendering shows early plans for two new Intel processor factories in Magdeburg, Germany

Intel said its expanded investment in the site is now expected to add up to more than €30 billion ($32.7 billion), of which about €10 billion ($10.9 billion) will be subsidies from the German government, reflecting the expanded scope and change in economic conditions since the site was first announced.

That announcement came early last year, and the agreement then was that Intel would get €6.8 billion ($7.3 billion) in subsidies towards the project, said to amount to about 40 percent of the estimated construction costs at the time.

The chipmaker had been pushing the federal government for an increase on this for months, claiming that rising energy and raw material prices were pushing up its costs, but as recently as last week, finance minister Christian Lindner had said there was no more money available.

Referring to the site at Magdeburg as "Silicon Junction", Intel chief Pat Gelsinger hailed it as a critical part of the company's strategy for future growth, and that the facility is expected to enter production in four to five years.

"We're grateful to the German federal government, Chancellor Olaf Scholz and the government of Saxony-Anhalt for their partnership and shared commitment to fulfilling the vision of a vibrant, sustainable, leading-edge semiconductor industry in Germany and the EU," he said in a statement.

This latest disclosure follows the announcement over the weekend that the chip giant is to invest $25 billion on a semiconductor manufacturing plant in the town of Kiryat Gat in Israel. This is scheduled to open in 2027, so will be coming online at about the same time as the German fab.

It also follows from the news last week when Intel revealed that it was spending up to $4.6 billion on a semiconductor assembly and test facility near Wrocław in Poland, which the company said will help meet critical demand for capacity that it is predicting for 2027.

Along with the Wrocław site, the Magdeburg facility will help to form a "capacity corridor from wafers to complete packaged products that is unrivalled and a major step toward a balanced and resilient supply chain for Europe," Gelsinger claimed – which will no doubt be music to the ears of the European Commission, which proposed the EU Chips Act subsidy scheme with exactly this end in mind.

Intel hinted that the "Silicon Junction" will start production with a more advanced production process than had originally been planned, saying: "Given the current timeline and scale of the investment, Intel plans to deploy more advanced Angstrom-era technology in the facilities than originally envisioned."

It isn't clear what this would mean since reports last year suggested it was being built from the outset for production of advanced process nodes such as Intel 3, Intel 20A (2nm), and 18A (1.8nm), and the chipmaker has yet to disclose anything more advanced than 18A.

Meanwhile, Taiwan is reported to have said that European countries should strengthen relations with the country if they want to see Taiwanese investment in semiconductor production.

According to Reuters, Taiwan's foreign minister, Joseph Wu, made the remarks during a visit to Europe last week. The country is home to TSMC, the largest contract semiconductor manufacturer in the world and therefore a key player in the global chip market.

TSMC has also been in negotiations to build a fabrication plant in Germany, in the state of Saxony, and is likewise looking for subsidies to help offset some of the expected €10 billion ($10.9 billion) cost of building it.

Wu reportedly said that any overseas investments by TSMC, including the potential factory in Germany, would need approval from Taiwan's government.

Taiwan is concerned about increasing Chinese belligerence over the island's status, and is said to be looking for increased support from Europe for its continued independence. ®

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