Intel (INTC.O) said on Monday that it will invest more than 30 billion euros ($33 billion) in Germany as part of its European development push, the largest investment by a foreign business in Europe’s largest economy.
According to a person familiar with the situation, the plan to establish two cutting-edge semiconductor factories in the eastern city of Magdeburg includes 10 billion euros in German subsidies.
Intel CEO Pat Gelsinger expressed gratitude to the German government and the state of Saxony-Anhalt, which includes Magdeburg, for “achieving the goal of a strong, sustainable, leading-edge semiconductor sector in Germany and the EU.”
Under Gelsinger’s leadership, Intel has invested billions of dollars in the construction of plants on three continents in order to reclaim its chipmaking supremacy and compete more effectively with competitors AMD (AMD.O), Nvidia (NVDA.O), and Samsung (005930.KS).
The German acquisition would be Intel’s third major investment in four days. Samsung launched plans for a $4.6 billion chip facility in fellow European Union member Poland on Friday, while Israel said on Sunday that Intel will invest $25 billion in a manufacturing there.
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, amidst growing alarm over supply chain fragility and dependence on South Korea and Taiwan for chips.
“Today’s agreement is an important step for Germany as a high-tech production location – and for our resilience,” Chancellor Olaf Scholz said on Monday.
“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.”
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ATTRACTIVE LOCATION
Berlin is also talking with Taiwan’s TSMC (2330.TW) and Sweden’s electric vehicle battery maker Northvolt about setting up production in Germany, having already convinced Tesla (TSLA.O) to build its first European gigafactory there.
Frankfurt-listed Intel shares were 0.4% higher at 1419 GMT.
Monday’s 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.
“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,” Economy Minister Robert Habeck said.
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, the U.S. chipmaker said.
Intel announced plans last year to build a big chip complex in Germany and facilities in Ireland and France as it seeks to benefit from easier European Commission funding rules and subsidies. The EU is trying to reduce its dependence on U.S. and Asian chips supply.
Gelsinger had told Reuters on Friday that the gap between what Germany had offered in subsidies and what Intel needed was too big but said he expected to reach an agreement, adding that his request was to be cost competitive.
“We lost this industry to Asia, we have to be competitive if we’re going to bring it back,” he said.
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