Intel to build US$33-billion chip plant in Germany after government pledges to cover 1/3rd of cost

German Chancellor Olaf Scholz, right, and Intel CEO Pat Gelsinger attend the signing ceremony of an agreement between the German government and the company at the Chancellery in Berlin, Germany, Monday, June 19, 2023. (AP Photo/Markus Schreiber)

BERLIN — Intel and the German government signed a deal Monday that will see the U.S. company spend more than 30 billion euros (US$32.8 billion) to build a chip manufacturing site in the eastern city of Magdeburg, after Germany pledged to cover a third of the investment required.

Word of the agreement came as German Chancellor Olaf Scholz met Intel CEO Pat Gelsinger in Berlin.

Intel acquired the land for two semiconductor facilities in Magdeburg in November. It says the first one is expected to start production in four or five years.

"The investment in Germany means a significant expansion of Intel's production capacity in Europe and is the biggest investment ever made by a foreign company in Germany," Economy Minister Robert Habeck, who is also the country's vice chancellor, said in a statement.

Before the revised letter of intent was signed Monday plans had foreseen a total investment of at least 17 billion euros. The German government confirmed that it will now provide 9.9 billion euros toward the total.

The plan will need approval by the European Union's executive branch to ensure the deal doesn't give Intel an unfair advantage over its competitors.

The "Silicon Junction" project in Magdeburg adds to Intel's plans for an assembly and test facility near Wroclaw, Poland and an existing chip factory in Ireland.

In a speech to Germany's main industry lobby group earlier Monday, Scholz highlighted efforts to encourage chip production in Europe, reducing his country's dependence on imported chips and global supply chains.

If all investment plans currently being considered are implemented, "and we are working on this, including today, Germany will become one of the big global semiconductor production sites," he said.