Intel boss calls for billions in subsidies for new chip factory

The head of the American IT group is promoting a major project in Europe. He speaks with Minister of Economic Affairs Altmaier, Prime Minister Söder and EU Commissioner Breton. Will Germany be the location?

Is Intel building a mega campus in Germany?

EU Internal Market Commissioner Thierry Breton and Intel boss Pat Gelsinger had a lot to talk about. They both sat together for lunch in Brussels on Friday for almost three hours. It was anything but a cozy meal together, it was said afterwards. Both sides have intensively negotiated with each other under which conditions Intel can get involved in the EU and participate in the European semiconductor alliance, according to Breton. Gelsinger has accepted that the European Union will set the direction for the planned expansion and development of European semiconductor production. Intel could play a central role in this.

Semiconductor production is now largely in the hands of Asian manufacturers. The car manufacturers and other industrial groups are currently having major problems with the semiconductor supply and must therefore reduce production. Breton, in turn, wants to make the EU more independent again with the semiconductor alliance. By the year 2030 he wants to increase the share of Europeans in semiconductor production in the world from 10 to 20 percent. His main focus is on chips of the smallest sizes, which are far less than the thickness of a hair.

He wants to build production capacities for chips of 2 nanometers or even less. But European companies are hardly able to do this without the participation of companies such as Intel, the Taiwanese company TSMC or the Koreans from Samsung – which is why Breton is currently seeking contact with the three groups.

With mixed success. A conversation with Samsung has not yet taken place. TSMC’s enthusiasm for building factories in Europe is apparently limited. Breton also spoke to their head of Europe, Maria Marced, on Friday. But the Taiwanese have indicated that they do not want to invest in Europe on a large scale at the moment. The fact that Intel’s CEO Gelsinger even traveled personally had a signal effect, especially in times of Corona.

In fact, Gelsinger used his stay in Brussels to dictate his terms. In the conversation with Breton, according to information from the FAZ, not a word was said about it. It was also not a question of possible locations for semiconductor production – in industry jargon only “fabs” are used.

In a conversation with several European media, however, Gelsinger gave figures: Intel is demanding 8 billion euros in government aid for the construction of a chip factory in Europe. His company had asked the European government as well as the American government to create the framework conditions in order to be able to keep up with the competition from Asia in terms of production. A chip factory costs around 10 billion euros, and usually you build not just one, but two factories at the same time, explained Intel at the request of the FAZ. In Asia, 40 percent is a common subsidy. So with a total of 20 billion euros, you get state aid of 8 billion euros.

Advertise for attractive conditions

Nobody around Breton wanted to comment on this amount. But the French leaves no doubt that the battery alliance should not fail because of money. In an interview with the FAZ a few days ago he promised public funds in the higher double-digit billion range. To this end, he wants to use the EU instrument for the promotion of important projects in the common European interest, IPCEI for short, which allows generous state aid that noticeably goes beyond the otherwise strict EU framework.

Where Intel could build the factories, the company does not want to decide until the second half of the year. There is also no reason for the group to rush the decision. As much as Breton emphasizes that the Europeans determined the conditions for Intel’s participation in the semiconductor alliance, the decision-makers at Intel know very well that the construction of semiconductor factories and the thousands of jobs that come with it is extremely attractive for the member states. This also applies to Germany. With this knowledge, it is easy to advertise the most attractive conditions for an engagement.

In the past few days, Gelsinger has met both Minister of Economic Affairs Peter Altmaier (CDU) and Bavarian Prime Minister Markus Söder (CSU) in Germany. He visited BMW and Deutsche Telekom. According to agency reports, he is also said to have visited the headquarters of VW – which Intel, however, denied.

VW boss Diess, in turn, wants the largest German automaker to develop its own high-performance chips in the future, which would make Intel’s involvement in Europe more attractive: The profitability of new production capacities in the EU naturally depends on the corresponding demand.

Finally, the semiconductor alliance is also intended to drive research and development. Europe does not just want to be an extended workbench, as Minister for Economic Affairs Altmaier emphasized after a meeting with Breton on Thursday. On the European side, the Dutch companies ASML and NXP, with whom Breton intends to speak in the coming week, are to participate in the chip alliance. The Frenchman is also in talks with Infineon and STMicroelectronics.