Intel’s German fab in peril as politician says ‘no’ to subsidy demand

Business news | June 11, 2023

By Peter Clarke

Fab wafer semiconductor

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Germany’s finance minister Christian Lindner has said the country will not meet Intel’s demand for higher subsidies for a proposed wafer fab complex in Magdeburg, according to a Financial Times report.

Chip giant Intel and Germany agreed the outline for a deal and they announced it with much fanfare in March 2022. However, even then there was talk of a funding gap that needed to be closed (see Opinion: Full-fat finance is missing from Intel’s European plan).

Lindner’s resistance to a subsidy increase has exposed a rift in the German government and put Intel’s European project at risk of further delays or scaling back its scope, the report said.

Germany had planned to provide €6.8 billion towards the €17 billion cost of building two wafer fab modules at Magdeburg. Construction was due to begin in 2023 or 2024 with a view to chip production starting in 2027. Since then expected wafer fab investment has risen to €20 billion and Intel has asked the German government to find €10 billion (Intel delays German fab, wants more subsidy).

May I have some more

Intel has reported weak financial results for several quarters as it struggles to compete in the weak PC market. Meanwhile it is trying to re-invigorate its semiconductor manufacturing technology having fallen behind foundries Samsung Electronics and Taiwan Semiconductor Manufacturing Co. Ltd.

The Intel Magdeburg is seen by the European Commission as vital to increasing Europe’s domestic supply of chips and its share of global production. While politicians such as Chancellor Olaf Scholz, a Social Democrat, and economy minister Robert Habeck, a Green, seem prepared to pay whatever it takes, the more conservative Lindner (Free Democrat Party) is not an advocate of subsidies and fears a competitive subsidy race against other nations and regions will end up wasting tax payers’ money.

“The chancellery and the economy ministry will have to show where the additional financing is to come from,” he said in an interview with the Financial Times.

One possible way round the impasse is to give Intel a discount on electricity supplied to its Magdeburg fabs, but it still represents a cost that has to be covered.