Intel Reaches Deal With Germany Over Magdeburg Chip Plant

Intel has reached a deal with the German government over 10bn euros (£8.5bn) in subsidies for its postponed chip manufacturing facility in Magdeburg, in the northeast part of the country.

The company is to sign an agreement with the German government on Monday at 1245 GMT or 2:45 p.m. local time in Berlin, the German government confirmed in a statement.

It said chancellor Olaf Scholz and Intel chief executive Pat Gelsinger would attend the signing ceremony, with the agreement to be signed by Scholz economic adviser Joerg Kukies and Intel executive vice president of operations Keyvan Esfarjani.

Intel initially agreed to build the Magdeburg facility with 6.8bn euros in subsidies, while estimating the total cost of the project at 17bn euros.

Soaring costs

But with soaring costs of energy, construction and materials, Intel now expects to spend 30bn euros on the project.

The parties did not disclose details of their agreement, but reports said the German government had agreed to increase its subsidies to a total of roughly 10bn euros.

Intel reportedly expects roughly 40 percent of its costs for the project to be subsidised, in line with other facilities that are receiving government funding through the European Union’s Chips Act.

The deal includes financial subsidies as well as price caps on energy, Bloomberg reported, citing unnamed sources.

Diversification

The EU and the US are amongst the countries looking to lure chip firms to diversify their production away from Asia after Covid-19 disruption affected supply chains of critical semiconductors.

Meanwhile Intel under Gelsinger has embarked on a massive expansion programme designed to help it regain its dominance and compete with rivals such as TSMC, Samsung Electronics and Nvidia.