Intel Asks Germany for Another $5 Billion to Build Megafab

7th Gen Intel Core processors are manufactured on silicon wafers at Intel production facilities. New 7th Gen Intel Core processors deliver richer experiences, incredible performance and responsiveness, and true ultra HD 4K entertainment in stunning new devices. (Credit: Intel Corporation)

(Credit: Intel) Over the past year, Intel has announced aggressive plans to increase the number of fabs it operates while spreading them across Europe (and America). This plan would help it achieve its “five nodes in four years” IDM 2.0 goal and offer the company some resiliency. Intel announced plans for new or expanded fabs in Italy, Ireland, Germany, France, and back home in Ohio. But unanticipated factors, such as continuing inflation and the war in Ukraine driving up energy costs, have made building costs skyrocket. Now Intel is telling the German government it still wants to build a fab there but will need more subsidies. The government already agreed to $7 billion, and Intel is asking for $4 to $5 billion more.

Word of Intel’s dilemma over its new fab in Magdeburg comes from Bloomberg. It notes Intel paused its construction plans at the end of last year when economic headwinds were affecting the PC industry. Several months later, it says it needs the government to pitch in more if it’s to begin construction soon. The site in Magdeburg was initially projected to cost around $17 billion. That cost has now reportedly ballooned to a staggering $30 billion. Luckily for Intel, the EU has its own version of the CHIPS Act, meant to spur semiconductor business across the region. Intel expects up to 40% of its fab costs to be covered by subsidies. Now that its prices have increased, it’s only right the government ponies up more cash, so the thinking goes. The EU bill earmarks $43 billion for semiconductor business expansion. The US version is around $52 billion.

Intel’s proposed site in Germany is in budgeting limbo. (Credit: Intel)

Intel had planned to produce Intel 18A (1.8nm) chips at the German location, according to Wccftech. It was also going to expand its fab in Ireland to handle the production of Intel 4 silicon (formerly 7nm). Additionally, it planned to build a new Italian site to manage back-end production and build a research center in France. Intel had budgeted up to $33 billion for all these sites across Europe. Now those funds will only cover one site, given the current costs.

Bloomberg’s sources indicate the plans for its Ireland and French facilities are still on track, but the German and Italian sites are now on hold. It will likely remain that way until Intel can secure new government funding. That could be more money or related infusions such as tax breaks or energy subsidies.

Intel hit a similar financial snag last year with its new fab in Ohio. It had to delay the facility’s groundbreaking, as the CHIPS Act hadn’t yet passed due to legislative wrangling. That bill did finally pass in July with bipartisan support. Intel formally broke ground on the site in September, and it’s expected to be online in 2025. The state of Ohio is giving Intel up to $2 billion in subsidies for the megafab.

The background to this sudden changing of plans is the horrid condition of the PC market. Intel has felt the brunt of it and posted its worst earnings in 20 years recently. Because of its current prospects, it’s begun tightening its belt to reduce costs by $10 billion annually by 2025. In the short term, it’s already cancelled an advanced sustainable Data Center R&D facility in Oregon.

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