Germany’s Finance Minister, Christian Lindner, has expressed that the budgetary constraints prevent the provision of higher subsidies requested by Intel for its new €17 billion chip plant in eastern Germany. While the government had initially approved €6.8 billion in support, Intel is now seeking around €10 billion due to increased energy and construction expenses. Lindner’s opposition to the augmented assistance has diminished the prospects of a favorable agreement between Intel and the German government.
Intel’s Subsidy Demands
As part of its substantial €17 billion investment strategy in Europe, Intel, the American chipmaker, had selected Magdeburg as the site for its fabrication plant, also known as a fab. However, due to escalating energy and construction expenses, Intel now finds itself in need of additional financial support.
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Christian Lindner’s Opposition
Christian Lindner, the Finance Minister, has unequivocally stated that there are no further funds accessible in the budget to meet Intel’s heightened subsidy requirements. Lindner emphasizes the importance of consolidating the budget instead of enlarging it presently, which directly contradicts Intel’s appeal for additional financial assistance.
Importance of Intel’s Project for Germany and the EU
The chip plant project by Intel represents the most substantial foreign investment in Germany since the postwar period. Its significance extends beyond national borders as it plays a vital role in the European Union’s objective of increasing its global semiconductor market share from under 10% to 20% by 2030. This project holds strategic importance for both Germany and the EU, as it aims to reduce reliance on Asian suppliers and enhance the domestic manufacturing capabilities of chips.
Diverging Opinions on Subsidies
The German government exhibits differing viewpoints on the matter of subsidies. While Economy Minister Robert Habeck and Chancellor Olaf Scholz advocate for Germany to align its financial support with the significant funds allocated by the Biden administration through the Chips and Science Act, which aims to enhance domestic semiconductor manufacturing with $52 billion in funding, some economists in Germany contend that subsidies are inefficient and impose an unnecessary burden on taxpayers.
Complexity of Supply Chains in the Chip Industry
The complexity of supply chains in the chip industry poses challenges to Germany’s goal of reducing its reliance on Asian suppliers. Achieving self-sufficiency in chip manufacturing necessitates addressing the intricate and interconnected nature of these supply chains, as well as ensuring the availability of crucial components and materials.
Split in the German Government
The German government is divided over the issue of increasing subsidies for Intel. While Chancellor Olaf Scholz and Economy Minister Robert Habeck are open to the idea of providing additional financial support, especially if Intel expands its investment, Christian Lindner, the leader of the pro-business Free Democrats (FDP), holds a skeptical stance toward subsidies and is reluctant to endorse an increase in financial aid.
Source: ft.com