Germany has agreed to write a huge check to US semiconductor giant Intel, raising the grant to nearly 10 billion euros (C$14.4 billion), some 3 billion more than originally planned. to launch a major factory project in the country.
The subsidy “goes from 6.8 billion to 9.9 billion euros,” a government source said on Monday, while Olaf Scholz’s coalition was itself divided on the issue.
Announced in March 2022, the construction of the Magdeburg plant (center-east), which was to start in the first half of the year, has still not started, Intel citing additional costs linked to inflation.
This site will offer “a major expansion of Intel’s production capacity in Europe”, assured in a press release Pat Gelsinger, CEO of the American group, welcoming the gesture of the German government.
The grant will represent nearly a third of the total investment for this project, now valued at some 30 billion euros, against 17 billion (respectively $43.3 and $25.5 billion CA) announced last year.
It will be “the largest investment ever made by a foreign company in Germany”, rejoiced the Minister of Economy and Climate, Robert Habeck, who fought to obtain the increase in aid.
More money in the budget
It is that the question had turned into a political standoff between the elected ecologist and the liberal Minister of Finance, Christian Lindner.
Innovation should not be done at the expense of the taxpayer, lamented the great treasurer of the government. “There is no more money in the budget”, he had asserted at the beginning of June.
Olaf Scholz’s coalition is having the greatest difficulty in completing the 2024 budget. After the largesse required by the pandemic, then the massive aid to households and businesses against inflation, the promised return to budgetary orthodoxy is causing tension.
The future factory in Magdeburg, 150 km west of Berlin, is the flagship project of a vast plan by Intel to produce electronic chips in Europe, with further investments planned, in France, Ireland and Germany. Poland in particular.
Intel announced in 2022 a program of up to 80 billion euros ($62 billion CAD) invested over ten years.
The German factory is also part of the “Chips Act”, the European Union’s program for it to reach 20% of the world’s semiconductor market by 2030, which means quadrupling current European production.
The European plan plans to mobilize a total of 43 billion euros (CA$115.4 billion) in public and private investment. The objective of the union is to regain a place alongside Asia and America in this strategic industry.
Grant Race
Germany wants to be the spearhead of this movement intended to increase European sovereignty.
The Magdeburg plant is to create some 3,000 jobs and “tens of thousands” of others among suppliers.
These investments are considered all the more important as Europe’s leading economy, which went into recession at the start of the year, doubts its economic model and is seeking to lay the foundations for a recovery.
The check to Intel could raise the stakes with other foreign investors: Germany is seeking to land the first European factory of the Taiwanese group TSMC – one of the world’s largest chipmakers.
Discussions are underway for a location in the Dresden region, Europe’s leading center for microelectronics, already nicknamed the “Silicon Saxony”. A decision is expected in August at the earliest, according to TSMC.
To stay in the race for industrial innovations, the European Union collectively and its Member States are spending lavishly, trying in particular to compete with the massive subsidies of the United States to support its green industry.
A controversial strategy among economists and in the political class.
“Our competitive weakness compared to the United States is not the size of the subsidies or the budgets, but their efficiency and the agility with which we use the funds available,” the German finance minister criticized on Monday.
“Why give money to such profitable companies? had criticized economist Reint Gropp, president of the Halle Institute for Economic Research (IWH), a few weeks ago.
Ten billion euros in subsidies, the sum is “hardly believable”, comments the daily on Monday Suddeutsche Zeitungnoting that “the State subsidizes each job created to the tune of one million euros”.