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Germany plans to provide Intel Corp. with more than €5 billion ($5.5 billion) towards the €17 billion ($18.8 billion) cost of building two wafer fabs in Magdeburg, according to Bloomberg.

Bloomberg cited unnamed officials as its sources.

However, Intel is expecting to receive more financial support. Intel CEO Pat Gelsinger said: “Still there’s still work ahead to obtain … the financial support to make the project competitive,” as he announced the plan. Previously Intel has indicated it is looking for a €10 billion support package (see Intel seeks $10 billion subsidy for ‘EuroFab’). Elsewhere Intel has told investors it expects 30 percent of its planned spending on plant and equipment will be provided by government subsidies.

It is not clear whether additional funds will be forthcoming from the European Union. The European Chips Act has a budget of €43 billion but much of this seems to be reallocated state aid. This aid will also come with strings attached. This will allow the European Union to insist on receiving order book information and being able to dictate what chips get made in times of crisis (see European Chips Act could include powers for EU control).

A bigger plan

The two-fab campus at Magdeburg in Saxony-Anhalt, Germany, is part of a larger Intel spending plan worth €33 billion (about US$36.5 billion). In addition to Magdeburg this includes an advanced packaging facility in Italy costing €4.5 billion and a €12 billion investment in Intel’s established wafer fab in Leixlip, near Dublin Ireland.

Each part of the deal would be scrutinized and approved by the European Commission under the European Union’s state aid rules.

Construction is due to start in Magdeburg in 2023 or 2024 with production to begin in 2027. Intel is the first company to announce such a major investment in European chip manufacturing since the EU announced the European Chips Act.

The EU has the goal of producing 20 percent of the world’s chips by 2030 amid fears that it has become too dependent on southeast Asia as a source of chips.

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