The “Magdeburger Lied” is part of the compulsory program in day care centers, schools and even in the football stadium. “The bus drives through the city, which, like us, still has a future,” says one verse. The region has long dreamed of a promising future. Compared to other places, however, there have not been any large settlements here since the fall of the Wall. That is set to change with the US chip manufacturer Intel.
In March, the company announced that the latest generation of chips would be produced in Magdeburg from 2027. In a first expansion stage, two semiconductor factories are to be built, which could create several thousand jobs. The new industrial area will cover 450 hectares – the equivalent of around 620 football pitches. For comparison: 300 hectares were available for the Tesla car factory in Brandenburg.
In Saxony-Anhalt, people rubbed their eyes for months after the announcement that Intel had actually decided on Magdeburg after a long selection process. There was talk of one of the largest investments in Germany’s post-war history. Saxony-Anhalt’s Prime Minister Reiner Haseloff (CDU) warned even then: “Now the work really begins.”
And then it got a bit more complicated, after a lot of things ran smoothly at the beginning. The purchase agreement between the city and the company for the property has been signed. But the fallout from the Ukraine war is hampering Intel’s plans. Construction and energy costs have risen sharply in recent months, along with general price increases and reduced demand for semiconductors. “Much has changed since we announced our plans to build a new semiconductor fab site in Germany,” said an Intel spokesman. The increase in energy costs in Germany and in Europe is “a problem”.
While Intel still said in September that “the start of construction is getting closer and is scheduled for the first half of 2023”, the tones are now more restrained. “We will provide more detailed information on the start of construction itself as soon as we can,” says the spokesman. It is working with governments to close the cost gap compared to non-EU locations. “Given the current economic and geopolitical situation, this gap has grown.”
The 17 billion euros that Intel announced in March as the start-up investment for the two factories will not be enough, according to reports. This is already about three times as much as Tesla has invested in Brandenburg. On request, the chip manufacturer does not comment in detail on possible cost increases. In politics, it is suspected that the company wants to create a certain pressure to negotiate with the more cautious statement in order to be able to get even more out of state funding.
The federal government has announced that it intends to support the settlement of the chip manufacturer. 6.8 billion euros were promised. As part of the funding, the EU wants to adjust the legal framework, but this could take until summer 2023. Among other things, it should be easier to support new semiconductor factories with subsidies.
State aid for companies in the EU is actually only possible in exceptional cases so that competition is not distorted. However, with the “Chips Act” the EU wants to prevent Europe from being left behind in the production of microchips. The heads of state and government of the EU countries want Europe to have a 20 percent share of the world market by 2030.
So it could take a while until the funding for Intel is in the towel. And the competition never sleeps. Infineon announced a few weeks ago that it intends to build a new semiconductor factory in Dresden with up to 1,000 jobs. There, too, the investment depends on support from public funds.
This means that the East is likely to face tough competition for skilled workers. In Magdeburg one hopes for commuters from Leipzig, Braunschweig and Berlin. Universities in the region are already reviewing the focal points of the chairs in order to set the course for the training.
City and state are pushing ahead with the planning despite the more difficult framework conditions. “The investor has committed himself to the location, which is the decisive basis for me. We are in the process of preparing this industrial park. The state is doing its homework,” says Haseloff. The necessary archaeological investigations are scheduled to begin on the Intel site in January. “We are on schedule. The real estate transaction went ahead, exactly on time, as planned. It’s progressing bit by bit.”
Intel shares are temporarily down 1.06 percent on the NASDAQ to $25.67.
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