Germany refuses Intel’s demand for billions in additional subsidies for chip factory construction

Germany says it will not provide additional subsidies for the construction of Intel’s new, advanced chip factory. The German government has previously promised 6.8 billion euros, but the chip manufacturer wants up to 10 billion in subsidies.

The German Finance Minister says in an interview with The Financial Times that there is no budget to spend up to 3.2 billion euros extra for the construction of the chip factory. “We are now trying to consolidate the budget, not increase it.” It is not mentioned what consequences this will have for the construction of the chip factory. Intel told the newspaper only that “there is a cost gap, and we are working with the government to figure out a way to close it.” According to the minister, it is possible that Germany can help Intel in other ways, such as by supplying the company with cheap electricity. “But we are at our limit in terms of budget.”

Last year it was announced that Intel would receive 6.8 billion euros in government subsidies for the construction of a mega chip factory in East Germany. Initially, the company wants to set up two production facilities at the location, for which Intel is allocating 17 billion euros. Ultimately, however, the campus must grow into a ‘small city’ with eight factories. Construction was initially planned to start in early 2023, but that was later postponed to ‘maybe 2024’.

However, last February it was announced that Intel is demanding 3.2 billion euros in additional financing for the project due to higher energy and construction costs. In April wrote The Financial Times that Intel will postpone construction until Germany comes up with more money. According to the newspaper, the government was willing to grant additional subsidies if Intel itself would invest more.

Renders of the Intel campus in Magdeburg, East Germany. Source: Intel Corporation