US chip giant Intel plans to invest more than €30 billion ($32.8 billion) for a production site in the east of Germany, of which nearly €10 billion, or one-third, will be paid for by German taxpayers, sources told dpa on Monday.
The German government agreed to provide Intel with the multibillion-euro subsidies for the plant in the state of Saxony-Anhalt, the sources said - up from the initial €6.8 billion in aid originally proposed.
The increase must still be approved by the European Commission, but Germany is optimistic, as the European Union wants to become technologically more independent of Asia in chip production.
At a ceremony on Monday for the signing of the revised letter of intent, German Chancellor Olaf Scholz spoke of the largest foreign direct investment in German history.
"With this investment, we are catching up with the world leaders in terms of technology," Scholz stressed. Maybe even more important - Germany could become less dependent on supply relationships with Asia, he said.
The California-based company is calling the project the "Silicon Junction" and in a statement said it "will serve as the connection point for other centres of innovation and manufacturing" across Germany and the region.
After signing a contract in Berlin that contains €9.9 billion in government subsidies, Intel boss Pat Gelsinger announced on Monday that construction of the planned chip factory in Magdeburg would start either at the end of this year or the beginning of 2024.
"Building the 'Silicon Junction' in Magdeburg is a critical part of our strategy for Intel’s growth," Gelsinger said. Combined with an announcement last week about an investment in Poland and Intel's Irish sites, the German investment "creates a capacity corridor from wafers to complete packaged products that is unrivalled and a major step toward a balanced and resilient supply chain for Europe," he said.
He thanked Scholz and local and state officials for their "shared commitment" to the project.
Intel said some 7,000 construction jobs will be created over the first building phase, and investment would produce about 3,000 permanent high-tech jobs at Intel and "tens of thousands of additional jobs across the industry ecosystem."
For months, there had been hard wrangling behind closed doors in Berlin.
Intel had announced in March 2022 that chips would be produced in Saxony-Anhalt's capital from 2027 onwards and that two semiconductor plants would be built for this purpose. Several thousand jobs were to be created, it said at the time.
But a lot has happened since then: The Ukraine war, the energy crisis and inflation led some to doubt whether the US company might not pull out if it did not receive enough state aid.
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