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June 20, 2023

Intel doubles Germany investment to €30bn and plans two new semiconductor fabs

Having resolved a subsidies dispute with the German government, Intel plans to increase its investment in "Silicon Junction".

By Matthew Gooding

Intel is doubling its planned investment in Germany, and will build two leading-edge semiconductor factories, or fabs, at a cost of €30bn. The announcement came after the chipmaker resolved a dispute with the German government over the level of subsidies it would receive for constructing the new facilities. It will now get just under €10bn of public money as part of the European Chips Act, which aims to grow the continent’s semiconductor capabilities.

German Chancellor Olaf Scholz, back right, shakes hands with Pat Gelsinger, back left, as State Secretary at the Chancellery Joerg Kukies, front right, and Intel executive vice president Keyvan Esfarjani, front left, also shake hands after signing an agreement between the German government and Intel. (Photo by ODD ANDERSEN/AFP via Getty Images)

The company signed an updated letter of intent with the German government yesterday, confirming it will build two new factories in Madeburgh, part of the Saxony region in eastern Germany. Intel’s original plan for the site, which it purchased last year and has been dubbed “Silicon Junction”, was to build one fab at a cost of €17bn, but it has now scaled up its ambitions. The new factories could be online by 2027.

Intel details Germany chip investment

Intel says the new factories will make its own chips, as well as carry out contract manufacturing for third parties as part of Intel Foundry Services. It will deploy more “advanced Angstrom-era technology in the facilities than originally envisioned,” the company said, referring to the anticipated period where components for chips become less than one nanometre in size. This is expected to confer performance and efficiency benefits.

Pat Gelsinger, Intel CEO, described the new factories as “a critical part of our strategy for Intel’s growth.” The company last week announced a new €4.2bn ($4.6bn) packaging plant in Poland, and together with its fab in Lexlip, Ireland, will soon have what Gelsinger describes as “a capacity corridor from wafers to complete packaged products that is unrivalled and a major step toward a balanced and resilient supply chain for Europe”.

He added: “We’re grateful to the German federal government, Chancellor Olaf Scholz and the government of Saxony-Anhalt for their partnership and shared commitment to fulfilling the vision of a vibrant, sustainable, leading-edge semiconductor industry in Germany and the EU.”

Intel is set to become a major beneficiary of the European Chips Act, which was signed into law in April and promises €43bn in subsidies for chipmaking. Its aim is to increase Europe’s share of the global chip production market to 20% by 2030. It is currently less than 10%. Progress has been on hold for some months due to a dispute between the German government and Intel around the level of subsidies the company will receive. This was initially set to be €6.8bn, but will now reach €9.9bn.

The new factories will create 7,000 direct jobs once up and running, Intel said.

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Israel next on Intel’s list?

Gelsinger may be opening the Intel chequebook in Israel, too. On Sunday, Israeli prime minister Benjamin Netanyahu said the company was planning to spend €25bn on a new factory in Kiryat Gat.

Intel already has a presence in Israel through Mobileye which develops and deploys advanced driver-assistance systems, which it bought for €15bn in 2017. The new facility will be the largest ever foreign investment in Israel, Netanyahu said.

Though Intel has not confirmed the deal, a company spokesperson said “Our intention to expand manufacturing capacity in Israel is driven by our commitment to meeting future manufacturing needs.”

The company’s share price, which cratered last year after a series of dismal financial results, climbed to its highest point of the year on Friday. Gelsinger will be hoping for a further lift when the Nasdaq market reopens today after the Juneteenth holiday weekend in the US.

Read more: Will chip giants scale back multi-billion dollar investment plans?

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