Intel deal signals Europe's will to secure chip chain

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Intel deal signals Europe's will to secure chip chain

Published: 20 Jun. 2023, 18:20 Updated: 20 Jun. 2023, 18:33

European Commission President Ursula von der Leyen speaks about the Commission's ″European Chips Act″ at the European Union (EU) headquarters in Brussels, Belgium, Feb. 8, 2022. [XINHUA]

With its own subsidy program dubbed the European Chips Act, Europe is ramping up efforts to become more self-sufficient in chip production, attracting big-name makers like Intel and TSMC to the continent.

Intel will spend more than $33 billion to develop two chip-making plants in Magdeburg, Germany, the company announced on Tuesday.

The deal is Germany's biggest-ever foreign investment.

The news comes only two days since Intel announced on Sunday that it will inject $25 billion into Israel to build a new chip factory. Last week, Intel also announced plans to build a $4.6 billion semiconductor assembly and testing plant in Poland.

The plants in Israel and Poland are expected to be ready by 2027.

This is on top of Intel’s prior announcement to invest 80 billion euros ($87.4 billion) in Europe to build multiple leading-edge chip factories and research institutes.

Intel is becoming a major chip partner for the European Union. The company already operates chip factories in Ireland and Germany and plans to build another plant in Italy. Research and development (R&D) centers will be built in France and Spain as well.

Intel, once considered No. 1 in the global semiconductor industry with its computer processors, crashed after the 2000s when it failed to adapt to new paradigms in the chip manufacturing process.

Lack of sales and major investments have led to $2.76 billion in losses in the first quart this year, the largest quarterly loss in the company's history.

A common denominator between Intel and Europe is that the two are putting aside past glory and starting afresh on the starting line of the chips race. Europe already possesses top-notch chip suppliers and institutes such as Dutch chip equipment maker ASML and Belgium’s IMEC, the largest semiconductor research institute in Europe.

Up-and-coming chipmakers include European companies as well, such as the Netherlands' NXP, Germany’s Infineon and Switzerland’s STMicroelectronics.

However, Europe’s disadvantage lies in the fact that these companies lack chip processing technologies, ultimately rendering them dependent on Samsung Electronics and TSMC to produce the chips.

The EU is now working towards building chip processing plants in Europe, the last piece of the puzzle to assemble a semiconductor manufacturing value chain to stabilize chip supplies.

Intel’s investment is also focused on chip processing. Experts consider Intel’s move to be advantageous for winning future deals with European automakers such as Mercedes-Benz, BMW and Bosch.

Subsidy problems seem to have been resolved as well. In turn for injecting more money to build two new chip plants in Germany, Intel is set to receive a government subsidy of at least 10 billion euros, according to the Financial Times. Earlier this year, Intel demanded the government increase the subsidy from an initial 6.8 billion euros to at least 10 billion euros, citing increased costs in construction and energy.

Multiple media outlets also say that the TSMC is also in talks with the German government to subsidize half the cost, 10 billion euros, to build its first European factory in Germany.

Meanwhile, Kyung Kye-hyun, CEO of Samsung Electronics' Device Solutions business, recently visited Tel Aviv, Munich, Stuttgart, Geneva and Amsterdam but did not announce plans to build factories there.

Experts say that the chipmaker is already juggling too many big-scale projects to build major factories in the U.S. and Korea.

“The quality of Europe’s facilities and human resources are relatively high, but it has been considered unfavorable to build a factory there due to costs,” an anonymous insider said. “Multiple announcements of huge subsidies supported by European governments are a strong signal of their determination to secure Europe’s semiconductor manufacturing value chain.”

BY LEE HEE-KWON [lee.jaelim@joongang.co.kr]