Germany, Intel agree chip plant subsidies worth €10 billion

By Kamil Kowalcze, Michael Nienaber and Jillian Deutsch

Germany and Intel Corp. sealed an agreement for the US company to receive subsidies worth €10 billion ($10.9 billion) for a semiconductor manufacturing facility in the eastern part of the country, according to people familiar with the deal.
Chancellor Olaf Scholz and Intel Chief Executive Officer Pat Gelsinger will attend a signing ceremony for the accord at 2:45 pm in Berlin, the German government said Monday in an emailed statement.

There were no details about the agreement in the statement beyond the information that it will be signed by Scholz’s top economic adviser, Joerg Kukies, and Keyvan Esfarjani, Intel’s executive vice president, chief global operations officer and general manager of manufacturing, supply chain and operations.

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Intel initially agreed to build the facility in the city of Magdeburg with €6.8 billion in government aid but postponed the start of construction at the plant because of economic headwinds.

The enhanced package now agreed will include both traditional aid in the form of financial subsidies as well as price caps on energy, according to the people.

Under Gelsinger, Intel has embarked on a huge expansion program aimed at recapturing its previous dominance of the industry and diversifying manufacturing hubs for critical components, currently concentrated in East Asia.

Magdeburg was a key part of those plans after it outbid other sites in Europe but the project foundered after energy prices soared along with the costs of construction and materials.

Intel originally estimated that the Magdeburg project would cost €17 billion but now expects to spend €30 billion, people familiar with the plans have said.

Like most projects that will receive government funding through the European Union’s Chips Act, Intel was expecting roughly 40% of its costs to be subsidized, the people said.