Germany Refuses to Increase Subsidies for Intel's Fab

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Intel may not get all the money it needs for the Magdeburg fab.

Intel
(Image credit: Intel)

Intel's upcoming site near Magdeburg, Germany, promises to become Europe's largest and most advanced semiconductor manufacturing facility, but its costs are increasing, and Intel recently expressed its intention to get more subsidies from the country's government. But the authorities are unwilling to provide the company more money as they do not have it in the budget, reports Financial Times.

"There is no more money available in the budget," Germany's finance minister Christian Lindner told Financial Times. "We are trying to consolidate the budget right now, not expand it."

Intel's proposed fab near Magdeburg, Germany, was expected to initially cost $18.7 billion (€30 billion), and the federal government agreed to provide the chip giant some $7.2 billion in state aid. But the fab construction was delayed, and due to rising energy prices, material costs, and inflation, now the cost of the production facility is expected to be about $31.675 billion (€30 billion), possibly because Intel also decided to install more advanced tools in a bid to produce chips on more sophisticated production nodes in Germany. To bridge this funding gap, the company is seeking additional subsidies of $4.223 billion - $5.279 billion (€4 billion - €5 billion) from the German government. 

The dispute over subsidies for Intel has caused a split among the authorities. Chancellor Olaf Scholz and Economy Minister Robert Habeck are believed to be open to increasing financial support to Intel as they are encouraged by the prospect of Intel increasing its total investment from €17 billion to €30 billion. However, Christian Lindner is against such subsidies and insists that the chancellery and economy ministry need to identify where additional funding would come from.

Some economists in Germany argue that subsidies are a waste of taxpayers' money, while others fear that reducing dependence on Asian suppliers in the chip industry is challenging given the complexity of semiconductor supply chains.

Intel declined to comment on the minister's comments but said, "There is a cost gap and we are working with the government on how to close it."

Lindner's opposition to subsidies is not limited to Intel. In addition, Lindner opposed Habeck's plan to subsidize the cost of electricity for energy-intensive industries, arguing against the legality of such state aid under EU rules. Meanwhile, lower electricity costs could also support Intel's upcoming fab near Magdeburg. Habeck reportedly suggested that the funding for these subsidies could come from the Economic Stabilization Fund, a suggestion Lindner dismissed as a violation of coalition agreements.

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Anton Shilov
Anton Shilov
Contributing Writer

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

8 Comments Comment from the forums
  • PEnns
    Don't you just love it when trillion dollar companies want tax payer handouts to expand their empires??

    And the "free market" beady-eyed lizards are just fine with throwing your tax payers' money at those behemoths.

    But God forbid if a penny is spent helping the poor or the middle class...the anti-welfare flags go up in heartbeat!!
    Reply
  • RedBear87
    Gelsinger probably is still assuming that Germans are made of money, but he should recognise that with no cheap energy and, as soon as Uncle Sam will say the word, no exports to China, Germany is finally become the poor and underdeveloped country "primarily agricultural and pastoral in its character" that was proposed by the Morgenthau plan.
    Reply
  • AndrewJacksonZA
    PEnns said:
    trillion dollar companies want tax payer handouts...the "free market"...

    But God forbid if a penny is spent helping the poor or the middle class...the anti-welfare flags go up in heartbeat!!
    This.


    RedBear87 said:
    Gelsinger probably is still assuming that Germans are made of money, but he should recognise that with no cheap energy
    Didn't Germany just close their nuclear plants in an effort to "appear go green" but now have to go back to their coal-fired power plants?
    Reply
  • bit_user
    PEnns said:
    the "free market" beady-eyed lizards are just fine with throwing your tax payers' money at those behemoths.

    But God forbid if a penny is spent helping the poor or the middle class...the anti-welfare flags go up in heartbeat!!
    I'm not saying whether Intel really needs these additional subsidies or not, but I do think some balance is needed. If advanced economies want to stay competitive in vital industries, they need to invest in key infrastructure. Otherwise, those industries will simply move to the countries that "get it". We've seen plenty of evidence showing this isn't a mere hypothetical scenario.

    So, I think the right solution is to balance investment in industry with other societal priorities. Your wherewithal to tackle any of those other priorities depends on not continually running excessive trade deficits, and that's why infrastructure investments are key. You also need to take care that the investments don't get passed straight through, into the pockets of executives and investors.
    Reply
  • USAFRet
    Preemptive notification....if this goes any farther into political junk....deleting and closing.
    Reply
  • bit_user
    AndrewJacksonZA said:
    Didn't Germany just close their nuclear plants in an effort to "appear go green" but now have to go back to their coal-fired power plants?
    It had nothing to do with being green, actually. Their concerns about nuclear safety simply overrode their concerns about climate change.
    Reply
  • A Stoner
    PEnns said:
    But God forbid if a penny is spent helping the poor or the middle class...the anti-welfare flags go up in heartbeat!!
    Well, I do not have numbers for Europe or Germany, but my understanding is that the welfare state in Europe is quite extravagant and there are far more pennies being thrown at the poor, which are legion compared to the penny being thrown at Intel. I do not support either form of welfare. But I would actually support the creation of jobs over the handing out of welfare as the jobs provide money to poor people who will work and welfare just makes life harder on everyone not getting the welfare.

    But for instance, here in America, our government spends a huge amount of our wealth every year, much of it in taxes, much in deficit spending. Let us look at the spending on corporate welfare vs the individual welfare for poor people, shall we?

    6.3 Trillion spending, with only 4.9 trillion in tax revenue, so far so bad... 25.5 trillion GDP, meaning they spent fully 25% of all wealth creation.

    Now to the spending, I will just cover the basics and ignore the money going to businesses, because honestly, it is a rounding error in all this once you see what is spent on the poor...

    Social Security, 1.2 trillion, Medicare, 760 billion, Medicaid 590 billion, income security programs, 580 billion, student loans 480 billion, other welfare spending 520 billion. Grand total, 4.1 trillion dollars our of 4.9 trillion in taxes and 6.3 trillion in spending.

    We also have the military at 750 billion and interest on the debt at 475 billion, 1.2 trillion dollars. On top of all those, we cover infrastructure such as roads and bridges, court systems, government payroll and so forth, I honestly do not know how much of the rest of the trillion dollars is spent on those, but there is only a bit less than 1 trillion dollars left to come up with funding for the roads, bridges, government payroll for which there are 2 million employees earning over 100,000 a year, or 200 billion dollars, leaving less than 800 billion dollars, oh, there is the infrastructure spending, 130 billion dollars, leaving 644 billion for the rest of government and hand outs to the businesses... Let us just go ahead and argue all 644 billion is spent on businesses as welfare payments.

    644 billion for companies and 4,100 billion for those poor poor people who refuse to work enough to pay their way through life... greater than a 6 to one spending... Does that fit your view of government spending? And let us be honest, the true amount of government welfare for corporations is far less than the 644 billion, I just gave up looking for where all the rest of the money is going and figure a 6 to one spending poor/business should pretty much blow your world view out of the water.
    Reply
  • USAFRet
    As expected....gone off the rails political.

    Closing this.
    Reply