The federal government apparently wants to subsidize the construction of the Intel chip factory in Magdeburg more than previously known. According to consistent media reports, the funding should amount to 9.9 billion euros.
According to media reports, the federal government wants to support the settlement of the US chip manufacturer Intel in Saxony-Anhalt with 9.9 billion euros. Accordingly, Intel is investing around 30 billion euros in Magdeburg, including state aid. Overall, Intel is almost doubling its investments, the dpa news agency quotes out of government circles. However, the increase in state aid still has to be approved by the EU Commission, the agency reports.
The level of subsidies for this project had been disputed until the very end. Intel had referred to increased costs. The federal government had originally promised 6.8 billion euros. The government initially did not confirm the subsidy volume.
A photo session with the Chancellor
The contract is signed by representatives of the federal government and the company. The Federal Government also invited to a photo session on the occasion of the signing in the presence of Chancellor Olaf Scholz and Intel boss Pat Gelsinger.
Intel is expanding worldwide: In the past few days, the group announced the construction of a $25 billion plant in Israel. At the same time, a test and assembly facility is to be built in Poland for 4.6 billion dollars. In the USA, too, Intel will set up state-subsidized new chip factories.
funding billions “questionable” for Intel
Subsidies are earmarked state aids that are not linked to direct consideration. They can be paid to other countries, sectors of the economy, companies and private households. Subsidies can be paid directly as grants or in the form of tax breaks.
The German subsidy payment to Intel is not only causing enthusiasm: According to Konstantin Oldenburger, market analyst at CMC, it is a nice rain of money for the ailing company and a transfer from the taxpayer to the shareholders.
Ifo President Clemens Fuest also considers the multi-billion dollar subsidies for setting up a factory for the US chip manufacturer Intel in Magdeburg to be “questionable”. “There are delivery risks with many products, that’s part of normal business life,” he told the news agency Reuters in view of the semiconductor offensive of the EU. “Securing against this is primarily the task of companies, not the state,” Fuest continues.
What will Intel make?
The funding amount is a very high insurance premium. There are also alternatives to domestic production such as diversification of suppliers, warehousing and recycling. “In addition, it is not clear what exactly is actually produced in Magdeburg, whether it is the chips that Germany or Europe need, and to whom these chips will be delivered in the event of a crisis,” criticized Fuest.
Reint E. Gropp, President of the Institute for Economic Research (IWH) in Halle, also criticized Plus minus the multi-billion dollar subsidy for Intel. He warns against giving billions of taxpayers’ money to global players. After all, Intel made a profit of eight billion dollars last year. This massive subsidization is also questionable from a strategic point of view.
Never again semiconductor shortage?
For the EU and the national European governments, the topic of chip production is of great strategic importance, since microchips are indispensable for central industrial value chains. The aim is to achieve greater independence from global supply chains, given the widespread use in almost all sectors of the economy.
Greater independence from Asian manufacturers is also being sought against the background of the current political and economic tensions between China and the USA. Currently, 75 to 80 percent of the chips produced worldwide come from Asia. The EU’s goal is to locate around 20 percent of global production in Europe by 2030, which would be about twice as much as now.
The subsidy amount provided to Intel for the construction of the chip factory appears high when compared to other subsidy programs in the EU or the USA. In addition to the subsidy practices of the individual states, the EU has put together a 43 billion euro package with the “European Chips Act”, financed from the EU budget and the private sector. The US government is providing $53 billion under the Chips Act.