Intel Subsidies for Ohio, Magedeburg Fabs Measure in Billions of Dollars

News
By Anton Shilov
published

Government subsidies are crucial for fabs in the U.S., Europe.

Intel
(Image credit: Intel)

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.

Anton Shilov
Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. 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.

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7 Comments Comment from the forums
  • JamesJones44
    Big tech sure knows how to take advantage of the Midwest's desperation. They open a facility in a rustbelt/midwest state for as long as the tax credit lasts then close the facility and transfer the talented individuals out of the state while leaving the rest. Tesla did this to Michigan, Foxconn in Wisconsin, the list goes on if you want to look up all of the ones in your favorite search engine.
    Reply
  • jkflipflop98
    JamesJones44 said:
    Big tech sure knows how to take advantage of the Midwest's desperation. They open a facility in a rustbelt/midwest state for as long as the tax credit lasts then close the facility and transfer the talented individuals out of the state while leaving the rest. Tesla did this to Michigan, Foxconn in Wisconsin, the list goes on if you want to look up all of the ones in your favorite search engine.

    After spending $15B+ to build a fabrication facility it doesn't make much sense to just leave it abandoned in the middle of a world-wide semiconductor shortage. But hey, you know what they say - love of conspiracy theories is a sign of extreme gullibility.
    Reply
  • Endymio
    JamesJones44 said:
    Big tech sure knows how to take advantage of the Midwest's desperation. They open a facility in a rustbelt/midwest state for as long as the tax credit lasts then close the facility and transfer the talented individuals out of the state while leaving the rest. Tesla did this to Michigan, Foxconn in Wisconsin
    Eh? Tesla's Tool and Die facility is still operating in Michigan; they merely sold the land underneath it, and now lease the facility from a landlord.

    As for FoxConn, your "take the money and run" narrative is wrong there as well. Foxconn inked the deal right before a world-wide economic slowdown, so it isn't surprising that their 13,000-employee factory was scaled back dramatically (to 1400 workers at present). And the vast majority of the "subsidies" Foxconn received were tax breaks-- meaning they still paid Wisconsin; they merely paid the them less than they otherwise would have. (But still more than the zero dollars the state would have received had Foxconn gone elsewhere.)
    Reply
  • JamesJones44
    Endymio said:
    Eh? Tesla's Tool and Die facility is still operating in Michigan; they merely sold the land underneath it, and now lease the facility from a landlord.

    As for FoxConn, your "take the money and run" narrative is wrong there as well. Foxconn inked the deal right before a world-wide economic slowdown, so it isn't surprising that their 13,000-employee factory was scaled back dramatically (to 1400 workers at present). And the vast majority of the "subsidies" Foxconn received were tax breaks-- meaning they still paid Wisconsin; they merely paid the them less than they otherwise would have. (But still more than the zero dollars the state would have received had Foxconn gone elsewhere.)

    How about the Tesla engineering center in Rochester Hills, MI... Where did that go? Oh yeah, they moved all of those employees to Palo Alto or they got pink slips after their subsidy lapsed.

    As for Foxconn, the pandemic has ended, there are still shortages of components, yet there is zero talk for Foxconn ramping that facility in Wisconsin. That facility was put there as a bare minimum to appease the former POTS. Once those subs are up I'll put large money in Vegas that the facility goes dark.
    Reply
  • JamesJones44
    jkflipflop98 said:
    After spending $15B+ to build a fabrication facility it doesn't make much sense to just leave it abandoned in the middle of a world-wide semiconductor shortage. But hey, you know what they say - love of conspiracy theories is a sign of extreme gullibility.

    https://jalopnik.com/a-peek-inside-the-soon-to-be-dead-tesla-motors-detroit-5065982
    Reply
  • Endymio
    JamesJones44 said:
    How about the Tesla engineering center in Rochester Hills, MI... Where did that go? Oh yeah, they moved all of those employees to Palo Alto or they got pink slips after their subsidy lapsed.
    Oops! That was supposed to be an R&D center; it never got anywhere near the 300-employees it originally planned, and most importantly, it never got one penny of government subsidies. It might have never been closed in the first place, except the state of Michigan refused to allow Tesla to sell, repair, or even to service its own vehicles in the state until the year 2020, as a result of Tesla suing Michigan.

    As for Foxconn, the pandemic has ended, there are still shortages of components, yet there is zero talk for Foxconn ramping that facility in Wisconsin.
    So what's your problem? 1400 employees is better than zero. The only actual cost to the state was the infrastructure it built around the site, and Foxconn agreed to pay $36 million/year to cover those costs, which, so far, it's been doing regularly. Your talk of them "taking money and then running" is a false narrative.

    Allow me to explain some simple mathematics. I promise to build a factory in Montana, say, and the state offers me a whopping $10 billion tax break for doing so. Actually-- let's make it $10 trillion. Now-- if I don't build the factory, how much money is Montana out? Zero. Not one penny. When you understand that, you'll understand the fallacy in your reasoning.
    Reply
  • ex_bubblehead
    Time to close this before it goes any further down the hole.
    Reply