Intel and Germany reach agreement on additional subsidy for construction of German chip factory
Intel will receive a subsidy package worth 10 billion euros for the construction of a German chip factory. The chipmaker and Germany agreed on this on Monday, insiders report to Bloomberg. Intel was previously promised 6.8 billion euros.
German Chancellor Olaf Scholz and Intel CEO Pat Gelsinger will attend a ceremony to sign the final agreement on Monday afternoon at 2:45 p.m., the German government reports in a statement to Bloomberg. The government did not yet want to provide financial details about the new support package, which is provided under the European Chips Act.
According to Bloomberg sources, the renewed support package is worth 10 billion euros. According to insiders, the package consists of financial support and a price ceiling on energy for the chip factory. It is unknown how high the maximum prices will be under the support package. Intel wanted did not respond to questions from Reuters.
Intel agreed last year to build the factory for 6.8 billion euros in state aid. However, the manufacturer demanded a total amount of 10 billion euros at the beginning of this year. The company says this is done because of higher energy prices and high labor costs in Germany. Intel initially expected to spend 17 billion euros on the construction of its factory in Virgenberg, but those costs would now rise to 30 billion euros, insiders told Bloomberg. The factory should be operational in 2027 and will then produce chips using ‘the most advanced processes’ that Intel will offer that year.
Intel’s expansion plans in Germany are part of the IDM 2.0 business strategy that the company has been pursuing since 2021. The manufacturer wants to produce chips for other companies, where Intel currently only produces its own processors. In addition to a chip factory in Germany, the company is working on expansions in other European countries. For example, there should be an assembly and test factory in Poland, in addition to an R&D center in France and a possible packaging factory in Italy.
A render of the upcoming Intel factory in Magdeburg. Source: Intel