Berlin and Intel strike a deal on the chip factory after months of support talks

BERLIN/STOCKHOLM (Reuters) – Germany will give U.S. chipmaker Intel 10 billion euros ($10.91 billion) in support for its planned Magdeburg plant, a source familiar with the matter said, capping months of talks on a project its chief executive said it would complete. It costs tens of billions of dollars.

The chancellery said in a statement that Germany has decided to sign an agreement with Intel Corporation (INTC.O) at 1245 GMT on Monday, and both Chancellor Olaf Schultz and Intel CEO Pat Gelsinger will attend the ceremony.

Scholz declined to comment when asked about the size of the subsidy, which reflects the high cost of energy and employment in Europe’s largest economy, referring to the signing ceremony at a later date.

Both the US and Europe are trying to attract big industrial players with a combination of government subsidies and favorable legislation, with Berlin worried about losing its attractiveness as a place to invest.

The German government is investing billions of euros in subsidies to lure technology companies to Germany amid growing concerns about supply chain fragility and reliance on South Korea and Taiwan for chips.

Berlin is also currently talking with Taiwan’s TSMC (2330.TW) and Swedish electric vehicle battery maker Northvolt about setting up production in Germany, having already persuaded Tesla (TSLA.O) to build its first European giant factory there.

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

The chipmaker last year announced plans to build a large chip park in Germany, along with facilities in Ireland and France, as it seeks to take advantage of the European Commission’s concessional financing and subsidies rules as the European Union tries to reduce its dependence on US and Asian supplies. .

The exact size of the investment has not yet been determined.

Under Gelsinger’s leadership, the company has invested billions building factories across three continents to regain its dominance in the chip industry 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 offered and what Intel needed was very large, but he expected an agreement, adding that his request was for it to be cost competitive.

“We lost this industry to Asia, we have to be competitive if we want 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)

Writing by Christoph Steitz; Editing by Rachel Moore, Jason Neely and Sharon Singleton

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