German finance minister says nein to more Intel subsidy cash

Questionmarks are being raised over Intel's planned chip factory in Germany after the country's finance minister said there is no more money available for further subsidies to help build it.

The Santa Clara giant announced early last year that it had selected a site in Magdeburg in eastern Germany to build a new European "mega-fab" to manufacture its chips. Intel had agreed with the federal government that it would receive €6.8 billion ($7.3 billion) in subsidies towards the project, said to amount to about 40 percent of the total construction costs.

But towards the end of the year, we reported that Intel was delaying the start of construction, blaming the rapidly rising costs of energy and raw materials, amid suggestions the company was seeking greater financial assistance.

Earlier this year, it emerged the chipmaker was asking for an additional €4-5 billion from Germany, to reflect the increase in build costs, but told The Register at the time that it was "committed to the project" and pointed to a purchase agreement signed last year for the land where the fab is planned to be built.

Now, Germany's Federal Minister of Finance Christian Lindner has told The Financial Times that he is opposed to any such increase because there is no money in the budget to meet Intel's demands.

"We are trying to consolidate the budget right now, not expand it," Lindner said.

Intel is not the only semiconductor biz trying to squeeze the German government for funding in exchange for building a local fabrication plant. Taiwanese contract manufacturer TSMC is said to be in talks with Berlin, plus partners such as NXP, Bosch, and Infineon for a new factory in Saxony, if subsidies are forthcoming.

The Magdeburg fabrication plant was intended as part of Intel's planned "Integrated Device Manufacturing 2.0" revamp, as detailed by CEO Pat Gelsinger in 2021. Intel also wants to expand manufacturing capacity by adding factories in Arizona.

The project was given a boost with the unveiling of the EU Chips Act last year, which allowed European member states to stump up subsidies for companies willing to invest in chip manufacturing on their soil.

But since that time, Intel has been hit hard by falling revenues caused by slowing sales of everything from servers to laptops, amid the economic uncertainty caused by rising energy prices which are driving inflation. The company posted a $2.8 billion loss for the first quarter of 2023.

This has led to investments in technology being balanced against cost-cutting measures to offset the reduced revenue, with Intel chief financial officer David Zinsner saying earlier this year the company plans to make $3 billion in savings in 2023, with $8 billion to $10 billion planned by the end of 2025.

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Intel has also pulled some investments, such as a proposed $200 million development center that was to have been built in Israel, and a $700 million research and development facility for immersion cooling in Hillsboro, Oregon.

It remains unanswered whether Intel will decide against building the Magdeburg facility should the extra subsidies not materialize. Intel still needs to invest in capacity for the future, and the long-term health of semiconductor demand is strong.

We asked Intel about its plans for the facility in light of comments by Germany's finance minister, and it responded that it "does not comment on rumors or speculation." ®