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Of the endless wait on the agreement between Italy and intel for the back-end factory and chip packaging, functional to support the two mega-fabs who will be born in Germany, we’ve been talking for a while (last time here). There are no developments on that front, unfortunately, but even in Teutonic territory there is a certain nervousness surrounding the operation and indiscretions are circulating in the local press on the evolution of the project, in particular on the subject of subsidies.
We know Intel made sure support from the German state of 6.8 billion eurosbut according to the local newspaper Handelsblatt (citing “several government officials”), the US company recently knocked on the door of the German Economy Minister to obtain an additional $3.2 billionfor a total amount of the subsidy of approx10 billion euros.
The Magdeburg site (renamed Silicon Junction), unveiled last March as part of a first European investment of 33 billion euros (but we are talking about 80 billion euros in 10 years), should cost 17 billion euros, giving life to two Fabs in operation from 2027. The first stone should be laid within the first half of this year.
From the initial momentum, however, it seems that the enthusiasm has gone a bit ‘to wane. Already in recent months, amid rumors and denials, there had been talk of a delay in the project and a problem with subsidies. What sure that Intel comes from two difficult quarterly results, with the latest posting a net loss of $700 million and a 32% drop in revenue. The company has kicked off a plan of cost review, cutting projects, staffing and even salaries on multiple levels.
Therefore, it cannot be excluded that Intel has re-established relations with European governments to review the extent of the subsidies, not only because the cost of materials and energy changed compared to March 2022, when the company announces the project, but also to try to limit some future costs and calm investors, who are certainly worried about the recent trend in the accounts.
Questioned by The RegisterIntel said through a spokesperson that since announcing the Magdeburg site “much changed: the geopolitical challenges they got bigger, the demand for semiconductors declined and theinflation and the recession are destroying the global economy”. However, the spokesman has reiterated the total commitment of the company towards the construction of Fabs in Germany.
According to recent rumors, the project will no longer require the disbursement of 17 billion euros, but rather it will cost at least 20 billion euros. Building an advanced semiconductor manufacturing plant is a very expensive investment, and even a small change in cost can drive up the construction price.
Take, for example, the two Arizona Fabs announced in 2021, a project that was initially expected to cost $20 billion but quickly ballooned to $30 billion forcing Intel to seek a financial partner, found in Brookfield Asset Management, to support the I commit.
The tumultuous global economy and cooling chip sales after the pandemic are posing serious challenges for Intel as it aims to cut costs by $10 billion a year by the end of 2025. there are many at stake and perhaps Intel is also playing a bit with the European institutions, betting on the fact that the Chips Act has not yet been formally passed, even though there has recently been an important passage.
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