When Intel outlined its IDM 2.0 strategy last year, it said that to build competitive semiconductor manufacturing facilities in the U.S. and Europe it needed governments to subsidize about one third of the investments. Now, Intel is getting massive incentives from local and federal authorities with its latest fabs in the United States and European Union and intends to re-emphasize its position in front of the U.S. Senate next week.
Earlier this year Intel established its next major manufacturing site in Ohio. Intel intends to invest about $20 billion in two fabs at the site initially with the first fab coming online in 2025. When the site is fully built out, it can house as many as eight fabs that will cost about $100 billion. The site will be Ohio's biggest economic development project in history, but to get the fab, the state had to provide Intel about $2.1 billion in various incentives. In addition, Intel is expected to get funding from the federal government as part of the CHIPS act. Overall, a significant portion of Intel's $20 billion investment will come from government coffers.
But that sums look insignificant when compared to subsidies that Intel is getting from Germany for its $18.7 billion fab project near Magdeburg. The company is reportedly getting about $5.5 billion in state aid, according to officials familiar with the matter cited by Bloomberg. $5.5 billion is about 29.4% of the project's cost.
But according to Intel CEO Pat Gelsinger, government subsidies are crucial for revival of semiconductor manufacturing in Europe and the U.S. Gelsinger will join Sanjay Mehrotra, the head of Micron, to testify before the U.S. Senate Commerce Committee on March 23, reports Reuters.
The two CEOs will substantiate government support for semiconductor fabs by pointing out vulnerabilities of the chip supply chain and its impact on economy at large, advantages of high-tech manufacturing for economy in general, competitiveness with China and national security.
Intel and Micron are two profitable U.S.-based semiconductor companies that need to invest in new manufacturing capacities to be competitive against Asian-based rivals. But modern semiconductor production facilities are extremely expensive — they may cost well above $20 billion. Companies like Samsung, TSMC, and SMIC receive huge support from their governments either in the form of low taxes or directly. As a result, they can produce huge volumes of chips at relatively low cost. Therefore, to be competitive against these giants, Intel and Micron need government aid, which is what heads of these two companies will tall the Senate next week.