Intel builds semiconductor fab in Magdeburg

Intel builds semiconductor fab in Magdeburg

Magdeburg has won the race for the largest European chip factory. Intel goes to Saxony-Anhalt. What were the decisive reasons? Now it’s official: Intel is coming to Magdeburg. The chip manufacturer has confirmed corresponding rumors about the Giga semiconductor Fab today. Intel CEO Pat Gelsinger already hinted last year that his company wants to build a large semiconductor factory in Europe. Along with France and Italy, Germany was the favorite in the choice of location. Now the die has been cast: As the company announced, the Fab will be built in Magdeburg.

Dresden and Penzing (west of Munich) had also had hopes. The investments are expected to be in the double-digit billion range and would not only be the largest investment for Saxony-Anhalt since reunification, but also the largest single investment in Germany in recent decades. In the first step, the chip manufacturer wants to invest around 33 billion euros throughout the EU, in the long term it should be 80 billion. 17 billion will flow to Magdeburg. For comparison: At the Tesla factory in Brandenburg, the investment sum amounted to about 5.8 billion euros. Experts expect between 10,000 and 20,000 jobs to be created at Intel itself, suppliers, and other companies that will settle in the haze circle, from the settlement in the Saxony-Anhalt state capital.

Why choose Magdeburg as a semiconductor location?

For Saxony-Anhalt and especially the region around Magdeburg, it would be the first semiconductor factory. Saxony-Anhalt’s employer president Marco Langhof had already advertised in advance with “attractive industrial estates” and the “nearby university”. Several “people familiar with the processes” had declared that Magdeburg had submitted a convincing application to Intel last autumn via the state-owned location marketing company Germany Trade and Invest, writes the FAZ.

The plant is to be built in the southwest of Magdeburg, in the Eulenberg industrial estate. There are large, relatively flat areas in the Börde, which can also be reached via the A14 and the A2. To the south, Leipzig and the airport there are quite close. About two hours away is the Dresden Silicon Saxony with the chip factories of Infineon, Bosch, and Globalfoundries. So far, this is Europe’s largest semiconductor location to date. To the north, the capital Berlin is not far. In addition, the plant is located between the plants of Tesla (Grünheide) and Volkswagen (Wolfsburg).

Initially, two semiconductor factories are planned. Planning is starting immediately, as construction is scheduled to start as early as 2023. The plant will primarily produce chips with 10 nm structure widths for Intel’s in-house processors and graphics units. Contract manufacturing for third parties is also possible after a corresponding expansion of capacities. Intel is planning big: “We would build six to eight fabs at our new location over a decade. That would be by far the largest fab project of all time on European soil,” quotes the Intel CEO. According to the MDR, production is scheduled to start in 2027.

Intel Worldwide Factory Network

In addition to the Magdeburg chip factory, Intel is also planning to set up plants in France and Italy. Above all, these should include the capital- and labor-intensive preparatory and follow-up steps of the actual chip production. A packaging plant is also under discussion. However, concrete information is not yet known.

Just recently, Intel announced a billion-dollar investment in a new plant in Ohio ($20 billion to $100 billion), and a year ago it announced the expansion of the existing Fab in Arizona ($20 billion). And the Irish site is also to be given more capacity. This diversification across different countries and continents is intended to be a hedge against the “geopolitical instability” in the world, according to Gelsinger.

Massive funding through The European Chips Act

Intel has been in talks with the EU for some time about how such a giga-fab could be located in Europe. The cost per fab – and Intel is planning several at the new location – amounts to a high single-digit to low double-digit billion amount. The same investment in Asia would be subsidized with up to 40 percent by the respective state, as is customary in South Korea or Taiwan. Ergo, Gelsinger makes the settlement in this country dependent on similarly high subsidies. However, these are not possible “just as a special permit”. Nor are they covered by national subsidy rules or the IPCEI rules.

Only the European Chips Act presented at the beginning of February makes a subsidy of such an amount possible – after all, it is also a billion euros. By way of comparison, IPCEI provides a maximum of three-digit million euros in national subsidies. The Chips Act has explicitly set itself the goal of increasing chip production in the EU – for self-sufficiency, but also for export. Dependence on other countries is to be reduced. For the first time, the Chips Act also allows for state aid for investments in technologies that are already produced elsewhere in the world but not in the EU – and that are of strategic importance.

Bitkom is also pleased with the Intel decision. President Achim Berg said: “The ongoing chip crisis is a major burden on the entire German economy. Now it is a matter of setting the course to reduce one-sided dependencies on semiconductor imports in the future and build up one’s own capabilities and capacities. We welcome Intel’s location decision to build a large chip factory in Germany. In the future, next-generation semiconductors will be manufactured in Magdeburg in the heart of Germany. A further semiconductor ecosystem will emerge around the university city, which will strengthen Germany as a business location as a whole. It is also an important step toward meeting the ever-growing demand for high-performance processors in Europe. The digital economy, especially companies in the telecommunications and cloud computing sectors, are just as dependent on supplies as traditional industries such as the automotive industry.”

The planned EU Chips Act will improve the framework conditions for this and make it possible to promote semiconductor production across the entire value chain from chip design to packaging. Germany should therefore use the instruments of the EU Chips Act in a targeted and consistent manner in order to further expand production capacities.