Intel to Receive Additional Funding for German Chip Factory in Magdeburg

Intel and the German government are close to an agreement on additional funding for the tech giant’s local branch. The German newspaper Handelsblatt reports that the final round of negotiations is underway.

Intel’s Expansion Plan

Under the leadership of CEO Pat Gelsinger, Intel has embarked on a massive expansion to regain its leadership position and diversify its critical component manufacturing bases, currently concentrated in East Asia. Magdeburg was a central part of the company’s expansion plan.

Negotiations for Additional Funding

The American chipmaker now receives a subsidy of 9.9 billion euros. That amount is higher than the previously agreed 6.8 billion. The extra money, like the original funding, will come from “various sources”, including the European Chips Act.
Handelsblatt sources say negotiations are likely to drag on into the weekend. However, an announcement could be made as early as Monday. Inflation in construction and material costs, as well as volatile energy costs, have been cited as reasons for Intel’s request for more money.
Differing opinions in Berlin have been a factor in the negotiations. Economy Minister Robert Habeck strongly supported the grant increase, seeing the branch in Magdeburg as a large one boost to Germany’s digital transformation efforts and as a way to secure German “economic sovereignty”. Finance Minister Christian Lindner, however, was more resistant to the increased spending.
Now it looks like Habeck won. Intel gets the money it needs to establish itself in Magdeburg. Reportedly, one of the conditions of the deal is that Intel must increase its investment in the plant beyond its original forecast of $17 billion. This is undoubtedly one of the points that the two sides will agree on over the weekend.
Intel and the German government are close to an agreement on additional funding for the tech giant’s local branch. After months of negotiations, the German federal government is about to increase the government subsidy for the Intel chip factory in Magdeburg. This is stated in an article in the Handelsblatt.
Intel has been pushing for more money due to inflation in construction and material costs, as well as volatile energy costs. The original €6.8 billion deal was negotiated in June 2022, before the destruction of the Nord Stream 2 gas pipeline sent German energy prices skyrocketing. As a result, Intel already put the brakes on the deal in December.
An additional $3.1 billion in government funding could ease Intel’s reticence. Economy Minister Robert Habeck strongly supported the grant increase, while Finance Minister Christian Lindner was more resistant to the increased spending. Now it looks like Habeck won. Intel gets the money it needs to establish itself in Magdeburg.
Reportedly, one of the conditions of the deal is that Intel must increase its investment in the plant beyond its original forecast of $17 billion. This is undoubtedly one of the points that the two sides will agree on over the weekend.
Intel’s expansion plan in Magdeburg is a major part of the company’s efforts to regain its leadership position and diversify its critical component manufacturing bases, currently concentrated in East Asia. The additional funding from the German government will help Intel to achieve its goals and secure German “economic sovereignty”. The final round of negotiations is underway and an announcement could be made as early as Monday.