Germany rejects additional subsidies for Intel fabs

Intel has secured almost €6.8 billion in subsidies from the German federal government for its Magdeburg wafer fab project. However, with shifting geopolitical landscapes, declining semiconductor demand, and inflationary pressures driving up costs, the fab’s construction price tag has soared from an initial €17 billion to €30 billion. Consequently, Intel has requested additional subsidies amounting to between €4 and €5 billion, implying the German federal government could potentially underwrite nearly €12 billion for the project.

According to the Financial Times, the German federal government is hesitant to provide further funding to Intel, as this expenditure was not anticipated in their budget. Germany’s Finance Minister, Christian Lindner, posited that the government’s current objective is to strive for robust budget management rather than budget expansion.

Intel’s request for increased subsidies has provoked controversy within the German federal government. On one hand, Chancellor Olaf Scholz and Economy Minister Robert Habeck demonstrate an open attitude towards an augmented subsidy, given Intel’s escalated total investment. Conversely, Christian Lindner opposes the move, firmly maintaining that the source of additional funding must be identified. Certain German economists believe that subsidies squander taxpayers’ money, while others express concern that, given the complexity of the semiconductor supply chain, mitigating the chip industry’s reliance on Asian suppliers presents a formidable challenge.

Intel declined to comment on the matter but conveyed that a “cost gap currently exists, and we are collaborating with the government to explore how to bridge this gap.”