Intel spends $33 billion in Germany in landmark expansion

Berlin/Stockholm: Intel will spend more than 30 billion euros ($33 billion) to develop two chip-making plants in Magdeburg as part of its expansion push in Europe, a deal Chancellor Olaf Scholz hailed on Monday as Germany’s biggest ever foreign investment.

Berlin has agreed subsidies worth nearly 10 billion euros with the US chipmaker, a person familiar with the matter said, more than the 6.8 billion euros it had initially offered Intel to build two leading-edge facilities in the eastern city.

Intel CEO Pat Gelsinger said he was grateful to the government and the state of Saxony-Anhalt, where Magdeburg is located, for “fulfilling the vision of a vibrant, sustainable, leading-edge semiconductor industry in Germany and the EU”.

Under Gelsinger, Intel has been investing billions in building factories across three continents to restore its dominance in chipmaking and better compete with rivals AMD, Nvidia and Samsung.

“Today’s agreement is an important step for Germany as a high-tech production location and for our resilience,” Scholz said after Monday’s signing.

“With this investment, we are catching up technologically with the world’s best and expanding our own capacities for the ecosystem development and production of microchips.” The German deal marks Intel’s third big investment in four days. It unveiled plans on Friday for a $4.6 billion chip plant in Poland, another European Union member, while Israel said on Sunday that Intel would spend $25 billion on a factory there.

Globally, semiconductor manufacturing is expected to become a trillion-dollar industry by 2030, expanding from $600 billion in 2021, according to McKinsey.

Both the United States and Europe are trying to lure big industrial players via a mix of state subsidies and favourable legislation, with Germany concerned about losing appeal as a place to invest.

The government in Berlin is investing billions of euros in subsidies to lure tech companies, amid growing alarm over supply chain fragility and dependence on South Korea and Taiwan for chips.