Berlin, Intel strike controversial chip plant subsidy deal

Berlin, Intel strike controversial chip plant subsidy deal

Germany subsudising the construction of an Intel chip factory to the tune of 10 billion euros has proved controversial
Germany subsudising the construction of an Intel chip factory to the tune of 10 billion euros has proved controversial. Photo: Pau BARRENA / AFP/File
Source: AFP

PAY ATTENTION: Enjoy reading our stories? Join YEN.com.gh's Telegram channel for more!

Berlin agreed Monday to grant US chip giant Intel subsidies totalling almost a third of the cost of a 30-billion-euro ($32.7-billion) German plant in a controversial decision following a months-long row.

Government sources told AFP that Berlin would provide 9.9 billion euros to support the project in the eastern city of Magdeburg, up from a figure of 6.8 billion originally agreed.

Intel unveiled the mammoth project, the centrepiece of a European investment drive, in March last year.

The EU is seeking to boost production of semiconductors, used in everything from fighter jets to smartphones, and reduce reliance on Asia after pandemic-induced shortages hit some industries, and Russia's war on Ukraine brought home the risks of over-dependency.

Construction work on the Intel project was due to begin in the first half of this year but it stalled after the Ukraine war sent inflation soaring.

Read also

Europeans scramble on air defence after decades of complacency

German officials and the company were then locked in talks for months, but both sides finally signed a deal Monday, which included the increased subsidies.

The project, now projected to cost a total of 30 billion euros, had originally been expected to cost 17 billion, the government sources said.

Chancellor Olaf Scholz, at a signing ceremony with Intel CEO Pat Gelsinger, hailed the agreement as "the single largest foreign direct investment in German history".

It represents "an important step for Germany as a high-tech production location -- and for our resilience," he said.

'Unbelievable' subsidies

Gelsinger said the project would help forge a "balanced and resilient supply chain for Europe".

The project will involve two semiconductor manufacturing sites, with the first to enter production in four to five years.

It is expected to create 3,000 permanent high-tech jobs at Intel, and tens of thousands of additional jobs across the industry ecosystem, the company said.

Read also

Basel defies forecast of art market slowdown

Under the new agreement, Intel will deploy more advanced technology at the sites than originally planned.

The huge state support has proved controversial in Germany, however, with newspaper Sueddeutsche Zeitsung criticising the "unbelievable amount of subsidies".

"Of the planned total investment of 30 billion euros, almost ten billion, or one third, will come from the taxpayer," it said in a commentary.

"The state subsidises every new job with one million euros."

Intel CEO Pat Gelsinger and German Chancellor Olaf Scholz oversaw the signing of the deal that will see Germany finance a third of the investment into the company's chip factory
Intel CEO Pat Gelsinger and German Chancellor Olaf Scholz oversaw the signing of the deal that will see Germany finance a third of the investment into the company's chip factory. Photo: Odd ANDERSEN / AFP
Source: AFP

Clemens Fuest, who heads economic institute Ifo, also called the subsidy "questionable".

Delivery risks are part and parcel of business life, and 10 billion is a very high premium to pay as an "insurance" to ensure supply, he said.

Asked earlier this year about delays to the project, Intel had cited growing geopolitical challenges, declining semiconductor demand and rising costs, from construction materials to energy.

The German plant is the centrepiece of a sweeping European investment push by Intel totalling tens of billions of euros and encompassing the entire chip production process, from the research to manufacturing and packaging.

Read also

France to push shipping carbon tax at finance summit

Last week, the firm -- which dominates the market for PC chips -- announced it will invest up to $4.6 billion to build a new site in Poland, creating around 2,000 jobs.

With its "Chips Act", the EU is aiming to double the bloc's share of global semiconductor production to 20 percent by 2030, and mobilise more than 43 billion euros in public and private investments.

It also seeking to counter huge subsidies on offer in the United States, which is also trying to boost domestic chip production.

New feature: Сheck out news that is picked for YOU ➡️ click on “Recommended for you” and enjoy!

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.