BERLIN/STOCKHOLM, June 19 (Reuters) – Intel (INTC.O) will spend more than 30 billion euros ($33 billion) developing two chip factories in Magdeburg as part of its expansion drive in Europe, a deal with Chancellor Olaf Scholz hailed Germany’s largest-ever foreign investment on Monday.
Berlin has agreed grants worth nearly €10 billion with the US chipmaker, a person familiar with the matter said, more than the €6.8 billion Intel had initially offered to buy two advanced facilities in the eastern city. to build.
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 semiconductor industry in Germany and the EU”.
Under Gelsinger, Intel has invested billions building factories on three continents to restore its dominance in chip making and better compete with rivals AMD (AMD.O), Nvidia (NVDA.O) and Samsung (005930.KS). ).
“Today’s agreement is an important step for Germany as a high-tech manufacturing site – and for our resilience,” said Scholz after Monday’s signing.
“With this investment, we are catching up with the world’s best in technology and expanding our own capabilities for ecosystem development and microchip manufacturing.”
The German deal marks Intel’s third major investment in four days. It unveiled plans on Friday for a $4.6 billion chip factory in Poland, another member of the European Union, while Israel said on Sunday Intel would spend $25 billion on a factory there.
According to McKinsey, semiconductor manufacturing worldwide is expected to become a multibillion-dollar industry by 2030, with growth of $600 billion by 2021.
Both the United States and Europe are trying to lure major industrial players through a mix of state subsidies and favorable legislation, with Germany fearing losing its appeal as an investment venue.
The government in Berlin is investing billions of euros in grants to lure tech companies amid growing concerns about supply chain fragility and South Korea’s and Taiwan’s reliance on chips.
ATTRACTIVE LOCATION
“The magnitude of Intel’s reaffirmed and increased commitment to the Magdeburg expansion speaks volumes about Germany’s appeal as a high-tech business location,” said Robert Hermann, CEO of the government agency Germany Trade & Invest.
Berlin is also in talks with Taiwanese TSMC (2330.TW) and Swedish battery manufacturer Northvolt about setting up production in Germany, having already convinced Tesla (TSLA.O) to build its first European gigafactory there.
Frankfurt-listed Intel shares were up 0.3% at 1534 GMT.
Monday’s deal includes what Intel said increased government support, including incentives, due to the expanded scope of the project since it was first announced in March 2022.
Initially, Intel wanted to invest 17 billion euros in the Magdeburg plant, an amount that has almost doubled to more than 30 billion.
“This shows: Germany is a very attractive location. We play at the forefront of global competition and provide sustainable and qualified jobs and value creation,” said Economic Affairs Minister Robert Habeck.
The first facility in Magdeburg is expected to be operational 4-5 years after the approval of the grant package by the European Commission, Intel said.
The first expansion will create about 7,000 construction jobs, plus about 3,000 high-tech jobs at Intel and tens of thousands of industry-wide jobs, the US chipmaker said.
Intel announced plans last year to build a large chip complex in Germany and facilities in Ireland and France as it seeks to take advantage of easier funding rules and grants from the European Commission. The EU is trying to reduce its dependence on the supply of US and Asian chips.
Gelsinger had told Reuters on Friday that the gap between what Germany had offered in subsidies and what Intel needed was too great, but said 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 want to bring it back,” he said.
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Additional reporting by Maria Martinez and Riham Alkousaa; Written by Christoph Steitz; Edited by Rachel More, Jason Neely, Sharon Singleton and Catherine Evans