Berlin to sign agreement with Intel after chip plant talks

THE German government and Intel are expected to ink a deal over the US chipmaker’s planned factory in Magdeburg, capping months of talks over subsidies needed for the project that its CEO said will cost it tens of billions of US dollars.

Germany has scheduled the signing of an agreement with Intel for 1245 GMT on Monday (Jun 19) and both Chancellor Olaf Scholz and Intel CEO Pat Gelsinger will be present for the ceremony, the chancellery said in a statement.

The agreement comes at a time when the US and Europe are both trying to lure big industrial players via a mix of state subsidies and favourable legislation, with Berlin concerned about losing appeal as a place to invest.

Berlin is currently also talking with Taiwan’s TSMC and Sweden’s electric vehicle battery maker Northvolt about setting up production in Germany, having already convinced Tesla to build its first European gigafactory there.

Intel has reportedly asked for subsidies worth 10 billion euros (S$14.6 billion) from Germany, where the cost for energy and labour is high.

The US chipmaker last year announced plans to build a big chip complex in Germany, along with facilities in Ireland and France, as it seeks to benefit from the European Commission’s eased funding rules and subsidies as the EU tries to cut its dependence on US and Asian supply.

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

Gelsinger told Reuters on Friday that the gap between what Germany had offered and what Intel needed was too big but he expected to reach an agreement, adding that his request was to be cost competitive.

“We lost this industry to Asia, we have to be competitive if we’re going to bring it back,” he said, adding the overall investment for the site would be “tens of billions of US dollars”.

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The German government has not confirmed how much state funding the company is set to receive for the project in the central German city of Magdeburg.

The Handelsblatt business daily reported last week that the US company would get 9.9 billion euros, up from a previously promised 6.8 billion.

Scholz’s government is investing billions of euros in subsidies to lure tech companies to Germany. This comes at a time of growing alarm over supply chain fragility and dependence on South Korea and Taiwan for chips. REUTERS