The German government is to provide a third of the cost. It is also the largest foreign direct investment in the modern history of the country.
Intel and the German government signed a deal Monday that will see the US company spend more than €30 billion to build a chip manufacturing site in the eastern city of Magdeburg after Germany pledged to cover a third of the investment required.
Word of the agreement came as German Chancellor Olaf Scholz met Intel CEO Pat Gelsinger in Berlin.
Intel acquired the land for two semiconductor facilities in Magdeburg in November. It says the first one is expected to start production in four or five years.
“The investment in Germany means a significant expansion of Intel's production capacity in Europe and is the biggest investment ever made by a foreign company in Germany," Vice Chancellor and Economy Minister Robert Habeck said in a statement.
Before the revised letter of intent was signed Monday plans had foreseen a total investment of at least €17 billion. The German government confirmed that it will now provide €9.9 billion toward the total.
The plan will need approval by the European Union's executive branch to ensure the deal doesn't give Intel an unfair advantage over its competitors.
The “Silicon Junction” project in Magdeburg adds to Intel's plans for an assembly and test facility near Wroclaw, Poland and an existing chip factory in Ireland.
In a speech to Germany's main industry lobby group earlier Monday, Scholz highlighted efforts to encourage chip production in Europe, reducing his country's dependence on imported chips and global supply chains.
If all investment plans currently being considered are implemented, “and we are working on this, including today, Germany will become one of the big global semiconductor production sites,” he said.
Some have questioned the size of Berlin's payout to one of the world's largest corporations, but the regional governor of Saxony-Anhalt says it's an essential strategic move.
"We cannot allow strategic technologies to take place and be made in Asia or exclusively in America, but we as Europe must have a certain self-sufficiency and also be able to provide decisive key products ourselves," Governor Reiner Haseloff said.
Work on the twin semiconductor plants is expected to be completed in 2027. The government says it will create 3,000 high-quality jobs and thousands more posts in supplier networks.
It will also boost the EU's declared aim of lessening its dependence on China and the US for microchip production