Intel to invest at least $19 billion in new chips factory in Germany

Mr Gelsinger has argued that government subsidies are key to reconciling the cost of building factories with the cost of setting up factories in Asia. He has lobbied officials in the United States and Europe about parallel grant packages, including grants to set up chip factories, arguing that government support could determine how far and how quickly Intel expands in both regions.

At the same time, Mr. Gelsinger and other Intel officials have held talks with officials in at least seven countries in Europe about a potential new site. Intel now has factories in Ireland and Israel, in addition to Arizona, Oregon and New Mexico.

Germany seemed a strong contender, in part because of the concentration of automakers that have become key customers for chip makers. Mr Gelsinger spoke at an auto industry trade show in Munich in September, highlighting the driver assistance technology of Intel’s Mobileye unit and posting a fisting photo with Angela Merkel, the then chancellor.

The country is no stranger to chip manufacturing. An important production center is Dresden, where Infineon, GlobalFoundries and Bosch operate semiconductor factories. Magdeburg, in Saxony-Anhalt, is located about 150 miles northwest of Dresden and 100 miles west of Berlin.

How the supply chain crisis unfolded

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The pandemic caused the problem. The highly complex and interconnected global supply chain is in turmoil. Much of the crisis has been traced to the Covid-19 outbreak, which led to an economic slowdown, mass layoffs and a production shutdown. This is what happened next:

A reduction in shipping. With fewer goods being made at the start of the pandemic and fewer people with paychecks to spend, manufacturers and shipping companies assumed demand would plummet. But that turned out to be a mistake, as the demand for some items would increase.

Demand for protective clothing peaked. In early 2020, the entire planet suddenly needed surgical masks and gowns. Most of these goods were made in China. As Chinese factories ramped up production, cargo ships all over the world began delivering equipment.

Then a shortage of sea containers. In many parts of the world, shipping containers piled up after they were emptied. The result was a shortage of containers in the one country that needed them most: China, where factories would start pumping out goods in record volumes.

Demand for durable goods increased. The pandemic shifted Americans’ spending from dining out and attending events to office furniture, electronics and kitchen appliances — mostly purchased online. Spending was also encouraged by government incentive programs.

Tense supply chains. Factory goods quickly flooded American ports. The increasing orders further exceeded the availability of shipping containers, and the cost of shipping a container from Shanghai to Los Angeles skyrocketed tenfold.

“Two Intel semiconductor plants in Magdeburg are an important and strong boost for the economy in difficult times, and a pivotal leap for Europe’s digital sovereignty,” said Robert Habeck, Germany’s Economy Minister.

In addition to the German factory, Intel said it would spend an additional $12 billion to double its manufacturing space in Leixlip, a town west of Dublin. In Italy, the company said it has entered into negotiations to build an advanced chip packaging and testing factory, with a potential investment of €4.5 billion and about 1,500 jobs.

In France, Intel said it would build a research and development center, creating 1,000 jobs, that will focus on high-performance computing areas. In Poland, the company is expanding its lab space.

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