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Berlin and Intel enter into an agreement on a chip factory after months of subsidy talks




  • Intel will get 10 billion euros in subsidies from Germany – source
  • Move highlights Berlin’s efforts to attract foreign investment
  • Intel shares -0.7% in Frankfurt

BERLIN/STOCKHOLM, June 19 (Reuters) – Germany will give U.S. chipmaker Intel 10 billion euros ($10.91 billion) in subsidies for its planned factory in Magdeburg, a source familiar with the matter said, ending months of talks about a project the CEO said would cost tens of billions of dollars.

Germany has scheduled the signing of an agreement with Intel ( INTC.O ) for 1245 GMT on Monday, and both Chancellor Olaf Scholz and Intel Chief Executive Pat Gelsinger will be present at the ceremony, the chancellery said in a statement.

Scholz declined to comment when asked about the size of the subsidies, which reflect the high costs of energy and labor in Europe’s largest economy, referring to the signing ceremony later.

Both the US and Europe are trying to lure big industrial players via a mix of government subsidies and favorable legislation, with Berlin concerned about losing its appeal as a place to invest.

The German government is investing billions of euros in subsidies to lure technology companies to Germany amid growing alarm over the fragility of its supply chain and dependence on South Korea and Taiwan for chips.

Berlin is also currently talking to Taiwan’s TSMC ( 2330.TW ) and Sweden’s electric car battery maker Northvolt about setting up production in Germany, having already convinced Tesla ( TSLA.O ) to build its first European gigafactory there.

Frankfurt-listed Intel shares were 0.7% lower at 1137 GMT.

The chip maker last year announced plans to build a large chip complex in Germany, along with facilities in Ireland and France, as it seeks to take advantage of European Commission funding and subsidy relief as the EU tries to cut its reliance on supplies from the US and Asia . .

It has not yet specified the exact size of the investment.

Under Gelsinger, the company has invested billions in building factories across three continents to restore its dominance in chipmaking and better compete with rivals AMD ( AMD.O ), Nvidia ( NVDA.O ) and Samsung ( 005930.KS ).

Gelsinger told Reuters on Friday that the gap between what Germany had offered and what Intel needed was too wide, but he expected to reach an agreement, adding that his request was to be cost competitive.

“We lost this industry to Asia, we have to be competitive if we’re going to bring it back,” he said, adding that the total investment for the site would be “tens of billions of dollars”.

($1 = 0.9150 euros)

Author of Christoph Steitz; editing by Rachel More, Jason Neely and Sharon Singleton

Our standards: Thomson Reuters Trust Principles.

Supantha Mukherjee

Thomson Reuters

Supantha leads the European technology and telecom coverage, with a particular focus on new technologies such as AI and 5G. He has been a journalist for around 18 years. He joined Reuters in 2006 and has covered a variety of beats ranging from the financial sector to technology. He is based in Stockholm, Sweden.



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