Intel decided some time ago that it was going to build a new factory in Magdeburg (Germany) as part of its plans to increase its manufacturing capacity in the European Union. At first, everything seemed to be going smoothly: the company promised that it would be the largest and most advanced semiconductor manufacturing facility in Europe, and the German government committed a significant amount to finance its construction. But soon after, Intel realized that the costs necessary to face the removal of the plant were increasing, and stopped its start to ask for more money from the German government.
But the authorities are not going to give more money to Intel, because according to the Financial Times, they do not have more budget for it. According to him German Finance Minister Christian Lindner«there is no more money available in the budget. We are trying to consolidate the budget, not trying to expand it«.
At first, Intel expected that building and operating the factory in Magdeburg would cost around 18.7 billion dollars (about 17 billion euros). Of these, the company would receive 7,200 million dollars (8,000 million euros) in state aid. But construction of the factory began to fall behind schedule, and due to rising energy prices, material costs, and inflation, the total costs of the factory would now exceed $31.6 billion.
This may also be because Intel decided to install more advanced tools on it, hoping to produce chips in Germany in more sophisticated production nodes. The company also decided, in view of the rising costs, it was time to ask Germany for more money. Now they request about 10,000 million euros. Therefore, he halted the beginning of the construction of the factory and asked to resume negotiations with the German government to ask them for around 5,000 million more dollars.
The request, apparently, has divided the German authorities. He Chancellor Olaf Scholz, of the SPD, and Finance Minister Robert Habeck, of the Greenswere open to give more support financial to the company, since they are encouraged that Intel has decided to multiply their investment almost three times to start. But Christian Linder, of the FPD, is opposed to this, and insists that the Chancellery and the Ministry of Economy have to clarify where this requested additional funding would come from.
In addition, some German economists are pointing out that these subsidies are a waste of taxpayers’ money, while others fear that reducing the industry’s reliance on Asian suppliers is too complex, given the complications of semiconductor supply chains. As for Intel, for now it has only said about Lindner’s comments that “there is a cost gap and we are working with the government on how to close it.”
On the other hand, there are suggestions to help Intel in another way. For example, supply cheap electricity to the Magdeburg plant. But when asked about it, Lindner has pointed out that they are “considering various options«, and that the cabinet still does not have an opinion on the matter. What he has made clear is that “budget-wise, we’ve reached our limit«.
The situation with Intel comes amid a spat in the German government over next year’s budget. Lindner, who has identified a funding gap of 20 billion euros, has worried his coalition partners by writing to all ministries apart from Defense, setting ceilings for their spending next year, and calling for big savings.
