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Friday, December 2, 2022

Intel plans to invest at least $19 billion on a new chip manufacturing facility in Germany

It was announced on Tuesday that Intel has chosen the German city of Magdeburg as the location for its next major chip production facility, continuing a huge expansion that aims to reduce reliance on Asian facilities for critical components.

As part of its plan to begin production in Ohio in late January, the Silicon Valley giant said it aimed to establish at least two semiconductor plants in the eastern German city for around 17 billion euros, or almost $19 billion. Intel said that the Magdeburg site, as well as investments in France, Ireland, Italy, Poland, and Spain, may get up to $90 billion in financing over a ten-year period to create more plants, similar to what the company accomplished in Ohio.

The German location is projected to employ around 3,000 permanent staff, as well as 7,000 construction workers during its development phase.

Intel’s action is the latest in a series of responses to a persistent scarcity of semiconductors, which was exacerbated initially by the epidemic and has hampered automakers and other firms in both Europe and the United States. Customers’ dependence on chip makers in Taiwan and South Korea, especially for the most modern goods, was brought into sharp relief by the supply chain disruption.

Patrick Gelsinger, who took over as Intel’s CEO a year ago, has set a target of increasing the United States’ share of global chip manufacturing to around 30 percent over the next decade, up from the current 12 percent share. In addition, he has said that he aims to boost Europe’s contribution from 9 percent to about 20% during the same time span.

In an interview, Mr. Gelsinger said that the conflict in Ukraine had caused the company’s announcement to be delayed by several weeks. However, after consultations with business leaders in Germany and other European nations, the corporation chose to persist with the investment strategy.

The move will be welcomed by officials in the European Union, who recently announced a plan to spend around $17 billion in public and private investment in the semiconductor business through 2030. The strategy is expected to be implemented by the end of this year. This proposal would add about $34 billion in public investments to the approximately $34 billion in public investments that were previously planned.

Following the announcement of the Ohio investment, Mr. Gelsinger got an invitation to President Biden’s State of the Union speech in the United States of America. Legislators in Congress are considering a package of incentives for the semiconductor sector that includes $52 billion in cash payments. The plan cleared the House in February after a version was approved by the Senate in June. During the talks between the two houses of Congress, it will be necessary to bring the two versions of the bill together.

In his argument, Mr. Gelsinger argues that government subsidies are essential in order to bring the prices of constructing factories into line with the costs of establishing facilities in Asia. According to him, government help may influence how far and how quickly Intel develops in both the United States and Europe. He has persuaded politicians in both countries for parallel subsidy packages that might include grants to establish chip plants.

At the same time, Mr. Gelsinger and other Intel executives have met with representatives from at least seven nations in Europe to discuss the possibility of establishing a new facility. Intel currently has manufacturing facilities in Ireland and Israel, in addition to its existing facilities in Arizona, Oregon, and New Mexico.

Germany had seemed to be a promising choice, in part because of the concentration of automobile manufacturers that had become important consumers for chip manufacturers. Mr. Gelsinger spoke at an auto industry trade event in Munich in September, showcasing driver-assistance technology from Intel’s Mobileye business and uploading a selfie of himself fist-bumping with Angela Merkel, who was the German chancellor at the time of the speech.

In the field of chip fabrication, the nation is no stranger. Dresden is a prominent semiconductor manufacturing centre, where companies such as Infineon, GlobalFoundries, and Bosch have semiconductor manufacturing facilities. It is about 150 miles northwest of Dresden and 100 miles west of Berlin to find Magdeburg, which is located in the state of Saxony-Anhalt.

Mr. Gelsinger said that the speed and magnitude of Intel’s investments were “very reliant” on the amount of financing provided by the European Union for chip manufacture as well as subsidies provided by the nations and areas where Intel planned to establish facilities. He described the appropriation of the E.U. chip as “not complete yet,” but as “quite far along.”

Jonathan James
I serve as a Senior Executive Journalist of The National Era
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