Germany rejected Intel’s demands to receive higher subsidies for its chip plant

The leading chipmaker Intel recently demanded that the government of Germany provides additional subsidies necessary for its 17 billion EUR ($18 billion) chip plant. However, the country’s minister of finance, Christian Lindner, refused, saying that this is not something that the country can afford right now.

Lindner was quoted saying that no more money is available in the budget and that the country is currently trying to consolidate the budget, not expand it.

Intel blames the high costs of energy and production

Intel’s shortage of subsidies supposedly comes due to higher construction and energy costs. Initially, the firm was due to receive 6.8 billion EUR from the country’s government in subsidies that would support its fabrication plant. However, even a strong economy like Germany eventually succumbed to the current global financial issues. The cost of everything continues to increase, so now, the country’s budget is empty.

Meanwhile, these same costs have led Intel to demand 10 billion EUR instead of the original 6.8 billion. Of course, given the new state of things, Germany could not grant that request.

Last year, Intel announced that it chose to settle in Magdeburg, a city in central Germany, and to build a chip-making complex as part of an $88 billion investment drive across Europe. That included providing a boost to its Ireland-based factory and a packaging and assembly site in Italy. Furthermore, the company also decided to set up a design and research facility in France.

The company established itself in some of the biggest economies in Europe, thanks to the funding provided by various governments. As such, it doesn’t differ from other major chipmakers, like the US’ Wolfspeed or Taiwan’s TSMC.

However, in this particular situation, the company’s request cannot be granted. The company’s chip plant is the largest foreign investment in postwar German history. Furthermore, it is seen as pivotal to the EU’s plans to boost its global semiconductor market share. Right now, that share is 10%, and the EU expects to boost into 20% by 2030, with Intel playing a massive role in those plans.

The opinions involving subsidies vary

It is worth noting that some in the German government, such as the country’s economy minister Robert Habeck, believe that Berlin should match the support that the Biden administration is providing under the Chips and Science Act. The US government is offering $52 billion in funding in order to boost domestic semiconductor manufacturing. The primary goal is for the US to become self-sufficient when it comes to chips and no longer depend on Asian manufacturers.

However, some argue that subsidies are a waste of taxpayers’ money. Some have said that Germany’s plans to become less dependent on Asian suppliers is nothing but a pipe dream. Given how complex the supply chains are in the chip industry, there is no easy answer about whether or not that is true.