Intel Ups Demand on Subsidies from German Government for New Fab to €5 Billion

[TheLostSwede]

Last month, reports were saying that Intel wanted an additional €3.2 billion from the German government in subsidies to build its fab in Magdeburg, but apparently that wasn't nearly enough, as the company has increased its demands to somewhere between €4 billion to €5 billion. What triggered Intel to go ask the German government for even more cash is most likely a combination of things, as Intel is going to want to cover increases in costs courtesy of interest hikes and the inflation that's going on globally, alongside soaring energy prices in Europe. The expected cost of the new fab is said to have increased from €17 billion to €30 billion, which is not exactly pocket change.

In a statement to Bloomberg, Intel said that "disruptions in the global economy have resulted in increased costs, from construction materials to energy," and continued "We appreciate the constructive dialogue with the federal government to address the cost gap that exists with building in other locations and make this project globally competitive." The construction start of the Magdeburg fab has already been delayed and according to Bloomberg, Intel is also considering delaying its planned assembly factory in Italy. It doesn't look promising for either party, as Intel seems to want to spend as little as possible on building its new facilities, while expecting various governments around the world to prop it up until the new facilities are making money. Hopefully neither nation will agree to Intel changing the terms of the deals, as it could cost more nations more than they would earn in long term revenue from Intel.



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[the54thvoid]

soaring energy prices in europe

I thought they'd stabilised and dropped again? At least, in the UK, they have.

 

[TheLostSwede]

I thought they'd stabilised and dropped again? At least, in the UK, they have.

They seem to be going up and down at will. The electricity price is the main issue for a fab, as they use a lot of it and Germany doesn't exactly have what we can call stable supply right now, since they decided that LNG was the future. Their friend in the east is having issues delivering after he started a certain special operation...

 

[usiname]

15.04.2023 - Intel already want 10b from Germany
12.06.2023 - Intel has found they can milk as much as they wants from Germany, the new request is for 20b

 

[TumbleGeorge]

expected cost of the new fab is said to have increased from €17 billion to €30 billion

At least to me it looks like Intel falce data about the estimated costs, either in the beginning or now!? As far as I know this is a criminal offence

 

[Easo]

...seriously?

 

[LabRat 891]

My bet's on Intel milking them, starting to build, then effing off and running w/ the money to some other country with something resembling a stable energy sector. 'Top of my head, that'd be France, Canada, or US. How's Poland doing?

 

[dgianstefani]

UK hasn't laughably given up on nuclear like some countries, and Intel already has a bunch of infrastructure in Ireland. Otherwise yeah, nice subsidies all over the world.

 

[cowcatwithahat]

Thanks papa, yeaaah!

 

[Ownedtbh]

"disruptions in the global economy have resulted in increased costs(...)"
I guess they meant that they sold less chips because amd is a stronger competitor

 

[Fluffmeister]

They will pay up because their car industry is more important than anything, same reason they apparently want to kick the EU ban on combustion engines down the proverbial road.

 

[Daven]

The EU should tell Intel to go pound sand.

 

[Tropick]

Germany,

There’s no easy way to say this: I have made the difficult decision to ask for an additional five billion dollars in subsidies. In the past two years, we have achieved huge wins together. But unfortunately, the macroeconomic environment has shifted in ways none of us could have foreseen, from an economy in which I did feel like funding this fab, to one in which I’d rather not.

I wish this weren’t the case. But we cannot avoid the externalities of today’s market, which is influenced by complicated global factors like the collapse of Chinese real estate, the war in Ukraine, and my desire for a marble kitchen island with a waterfall edge. As we all know, our competitors are relentless. Even as we speak, they’re streamlining, optimizing, and booking the best contractors in the Bay Area for the next eighteen months. If I could want to pay for this fab, I would. I just simply can’t.

Ultimately, this decision was made out of an abundance of confidence in our mission and all the work you’ve put into it. Let’s not mince words, though; the accountability for this decision rests with me. The consequences, on the other hand, rest with you. In the meantime, please take a moment to reflect, refocus, and visualize the bright future ahead: one in which we double down on executional excellence, and I feel interested in paying for this fab again.

Much Love,
Pat

Edit: Should be noted I got most of this text from an article from McSweeny's regarding the recent Google layoffs. Recommended read for a morbid laugh.

 

[ThrashZone]

They seem to be going up and down at will. The electricity price is the main issue for a fab, as they use a lot of it and Germany doesn't exactly have what we can call stable supply right now, since they decided that LNG was the future. Their friend in the east is having issues delivering after he started a certain special operation...

Hi,
You mean the Intel wasn't building their own wind and solar farms ? the hell you say

 

[bonehead123]

Germany,

There’s no easy way to say this: I have made the difficult decision to ask for an additional five billion dollars in subsidies. In the past two years, we have achieved huge wins together. But unfortunately, the macroeconomic environment has shifted in ways none of us could have foreseen, from an economy in which I did feel like funding this fab, to one in which I’d rather not.

I wish this weren’t the case. But we cannot avoid the externalities of today’s market, which is influenced by complicated global factors like the collapse of Chinese real estate, the war in Ukraine, and my desire for a marble kitchen island with a waterfall edge. As we all know, our competitors are relentless. Even as we speak, they’re streamlining, optimizing, and booking the best contractors in the Bay Area for the next eighteen months. If I could want to pay for this fab, I would. I just simply can’t.

Ultimately, this decision was made out of an abundance of confidence in our mission and all the work you’ve put into it. Let’s not mince words, though; the accountability for this decision rests with me. The consequences, on the other hand, rest with you. In the meantime, please take a moment to reflect, refocus, and visualize the bright future ahead: one in which we double down on executional excellence, and I feel interested in paying for this fab again.

Much Love,
Pat

Edit: Should be noted I got most of this text from an article from McSweeny's regarding the recent Google layoffs. Recommended read for a morbid laugh.

Should just simplify this by saying that his (patsyboy) priorities have changed to:

A) Bigger bonus checks & expense accounts
B) Moar lear jets
C) Bigger yachts
D) Moar fabs

 

[TumbleGeorge]

Should just simplify this by saying that his (patsyboy) priorities have changed to:

A) Bigger bonus checks & expense accounts
B) Moar lear jets
C) Bigger yachts
D) Moar fabs

No way! The "A" is money for purchase of leather jacket for gift for his friend Huang.

 

[evernessince]

Giving companies subsidies so they don't sod off to the next cheapest place is akin to paying blackmail. Short term gain, long term pain.

Public money goes to build the infrastructure that enables chip fabs to begin with, it goes to educate the workforce they rely on, it pays for the fire and police protection they benefit from, it covers the cost of protecting their IP, and much much more. By allocating funding to these companies instead of public projects or services you reduce the quality of education, infrastructure, and more as compared to had you simply put all the intended money towards them. In turn this reduces the desirability of the country to high paying companies.

If you want to have high paying jobs created in your country, you do so by striving to have the best education system, best infrastructure, ect as possible. That in an of itself will attract companies. You cannot expect first world countries to be able to get every company down to paying 3rd world tax rates. A cursory glance at those countries reveals why they are able to maintain such low tax rates and the cost is obvious.

 

[Tahagomizer]

Wonderful, we all know that giving money to private companies has always worked so incredibly well for the public, just look at the solid, world-leading and easily accessible network infrastructure american corporations built with all the money they siphoned from the government for a few decades.
That's what we get for legalizing bribery as long as it's called "lobbying".

 

[maxfly]

Time to pull the plug until the war is over. Otherwise, this will be a moneypit for both entities. Give it 2 or 3 years and revisit.

 

[kondamin]

Giving companies subsidies so they don't sod off to the next cheapest place is akin to paying blackmail. Short term gain, long term pain.

Public money goes to build the infrastructure that enables chip fabs to begin with, it goes to educate the workforce they rely on, it pays for the fire and police protection they benefit from, it covers the cost of protecting their IP, and much much more. By allocating funding to these companies instead of public projects or services you reduce the quality of education, infrastructure, and more as compared to had you simply put all the intended money towards them. In turn this reduces the desirability of the country to high paying companies.

If you want to have high paying jobs created in your country, you do so by striving to have the best education system, best infrastructure, ect as possible. That in an of itself will attract companies. You cannot expect first world countries to be able to get every company down to paying 3rd world tax rates. A cursory glance at those countries reveals why they are able to maintain such low tax rates and the cost is obvious.

Germany's GDP is ~4.4Trillion USD, about 10% of that goes in to education
Yes 5billion is a lot of money, but it wouldn't do much education wise.

They would probably save 100billion if education became sane again and made students write stuff in little workbooks instead of handing out 20pages of copies per student per lesson.

 

[Chaitanya]

Same with Covid vaccines which took public money for development but profit only went to companies, Intel will be pocketing all the profit in this case it will be funneled back to US while German tax payers will be paying for fabs.

 

[Minus Infinity]

Hand over zee money or vee vill valk.

Intel so desperate for money trying to blackmail countries now. Well done Pat, well done.

 

[evernessince]

Germany's GDP is ~4.4Trillion USD, about 10% of that goes in to education
Yes 5billion is a lot of money, but it wouldn't do much education wise.

They would probably save 100billion if education became sane again and made students write stuff in little workbooks instead of handing out 20pages of copies per student per lesson.

You are assuming that this is the only government handout that Germany would give to companies. If you promote a policy agenda that encourages company handouts, the total will be much much higher as the government handouts add up.

I'd challenge the notion that 5 Billion overall is a small amount. A lot of eduction's costs are unavoidable and cannot be cut without reducing the quality of learning. For example, the cost to own and operate the building, teacher salaries, and equipment needed. 5 Billion extra can mean a lot in this environment, whether that be helping poor or disabled students, improving the effectiveness of lessons, or improving the schools digital services (which was extremely important during the pandemic).

 

[trsttte]

Is an Intel fab in Europe even usefull? 5 billion seems like a lot for a few political points, companies that work with more general semi conductors (pmic, micros, etc.) would be more useful, or simply other technology fields like batteries where US subsidies are drawing everyone in (even das Volkswagen)

 

[Ferrum Master]

It looks like the usual corporate bribe tactics does not work that well for Intel anymore.

How about EU some anti monopoly investigations, to mitigate the costs?

There is no fundamental reason to invest in it. Give that money to universities funding development of other technologies especially renewables and battery tech. We don't need more overpriced chips.