Chip manufacturer Intel is expanding its production in Europe with a new multi-billion dollar chip factory in Magdeburg, Germany. Intel’s announcement is the first concrete result of the European Chips Act, a EUR 43 billion incentive program with which the EU wants to build an independent chip industry. Now 8% of all chips in the world are produced in the EU. The aim is for Europe to have a 20 percent market share by 2030. An open factory for advanced chips, such as Intel wants to build, is an indispensable ingredient. European chip manufacturers no longer have the knowledge to develop the very latest production technology.
On Tuesday afternoon, the American company will provide further information about the plans. It was already clear that Intel wanted to expand into the EU; CEO Pat Gelsinger traveled for a year to The Hague, Brussels and Berlin, among other places, to see what the best location would be. He also visited chip machine manufacturer ASML and the Leuven research institute imec, where many chip manufacturers refine their technology.
Also read: EU wants to allocate 43 billion for chip industry
Chips for car manufacturers
Intel comes when called, is the opinion in Brussels. Although it takes years before a new factory actually produces, the need in Europe is great. The world is still struggling with a chip shortage, partly due to the corona pandemic, geopolitical tensions between the US and China are putting pressure on the tech industry and the war between Russia and Ukraine has made Europe realize that it must be able to be self-sufficient in all areas – even when it comes to it. about semiconductors.
In addition to new equipment and real estate, a new chip factory primarily requires an investment in technical talent. The Netherlands, Ireland and France seemed to compete as countries of residence. Germany was the most obvious place for a large chip factory. The main buyers of semiconductors – car manufacturers and their suppliers – are located in Germany.
Magdeburg is the capital of the German city of Sachsen-Anhalt. According to German media, the city of Schwerin, in Mecklenburg-Vorpommern, was also in the running to house the Intel factory.
New EUV technology
For Intel, the investment is also a dire necessity. When it comes to manufacturing advanced chips, the company lags behind competitors from Taiwan (TSMC) and South Korea (Samsung). They produce chips with EUV lithography from the Dutch ASML. Intel has already placed an order with ASML for a new generation of EUV machines, which have yet to be built.
Also read: Behind the scenes at ASML, the European leader in chip technology.
The Magdeburg factory becomes a foundry – an open production line where other chip manufacturers can also have their designs produced. That was a requirement from Brussels, if Intel wanted to claim billions of support. CEO Gelsinger had previously hinted that Europe would have to bear about 40 percent of the start-up costs, otherwise Intel would not risk the investment. The start-up costs of a modern chip factory are quickly around 15 to 20 billion dollars and the production is not yet profitable in the first few years.
Of the Brussels stimulus package of 43 billion euros, 30 billion has been earmarked to attract new chip manufacturers. TSMC would also consider building an additional factory in Europe. In addition, Thierry Breton, the European Commissioner for Internal Affairs who is behind the Chips Act, has also approached Samsung.
Intel also recently announced that it is building a new $20 billion chip factory in the US state of Ohio. That expansion falls under the American Chip Act: an incentive program with which the US, like Europe, wants to prevent it from becoming too dependent on the production of chips in Asia.