Leading-edge semiconductor production facilities already cost north of $10 billion, and the more advanced process technologies they use, the more expensive they get. But in Europe, inflation, rising energy pricing, and the increasing costs of materials have driven Intel's Germany fab costs so significantly that the company is now seeking an additional $5 billion in subsidies from the country's government, reports Bloomberg.
When Intel announced plans to build its fab near Magdeburg, Germany, it said that the production facility would cost $18.7 billion and it would get $7.2 billion in state aid to complete the project. The site near Magdeburg is set to become Intel's next major fab campus, which was meant to cost as much as $88 billion. However, German carmakers couldn't get all the chips they needed in 2020 ~ 2022, so the country was more than willing to help Intel to establish its new manufacturing site near Magdeburg.
But then the company had to postpone construction of the chip plant, and now with soaring energy prices, costs of materials, and high inflation, it believes that it would need to spend $31.675 billion (€30 billion) on the project. This is why Intel would need an additional $4.223 billion – $5.279 billion (€4 billion – €5 billion) in subsidies from Germany, the report says.
The chip giant did not directly confirm the sum, but it was mentioned in talks with the German government, who confirmed that it was renegotiating the deal.
"Disruptions in the global economy have resulted in increased costs, from construction materials to energy," a statement by Intel reads. "We appreciate the constructive dialogue with the federal government to address the cost gap that exists with building in other locations and make this project globally competitive."
The German economic ministry declined to comment on its talks with the CPU giant but reaffirmed the EU's goal of producing 20% of the global chip output by 2030 is still in place.
"With this goal in mind, the federal government is prepared to support the semiconductor industry in Germany with several billion euros and to enable new factories to be set up," the ministry said, adding that extra funding would need approval from the European Commission.
In addition to its fab in Germany, the company intends to build an R&D center in France. This project is on track, according to Bloomberg's sources.