Germany grapples with fresh economic blow as Intel pulls plug on new plant

Intel’s decision to postpone two new chip factories in Germany and Poland has annoyed politicians in both countries – and triggered a cascade of knock-on domestic political issues.
Site-clearing works are already at an advanced stage in the central city of Magdeburg for a new industrial area covering 1,100 hectares – the equivalent of 1,500 soccer pitches or 1.5 times the size of Dublin’s Phoenix Park.
Two months ago, Intel chief executive Pat Gelsinger insisted the project was proceeding but, in a phone call on Monday, German politicians said he told them his firm was “not in a position to start the investment for liquidity reasons”.
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The chancellor, Olaf Scholz, wincing at another blow to his country’s flatlining economy, made clear on Tuesday he expects the company to “stick to” its agreement.
The US chip company insisted the factory in Magdeburg, 150km southwest of Berlin, and another in Wroclaw in southern Poland were only being “paused” for two years.
In June 2023, Mr Gelsinger and Mr Scholz shook hands on the €30 billion investment in Magdeburg to produce chips from 2028. Some €9.9 billion from the German state, the largest-ever such investment, helped seal the deal. On Tuesday, Saxony-Anhalt state premier Reiner Haseloff insisted that “no thought should be given to cancelling” the investment he hoped would create 3,000 jobs and lift his economically deprived state – and complement a high-tech investment push in neighbouring Saxony.
The news could be a blessing in disguise for Germany’s liberal finance minister, Christian Lindner, who has spent months trying to plug a €12-billion hole in his federal budget.
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“All funds not required for Intel must be reserved in the federal budget to reduce unresolved financial issues,” he wrote on Twitter/X. “Anything else would not be responsible politics.”
However Green economics minister Robert Habeck insisted the money should be parked, and pointed to legal barriers he said prevented it being diverted into the regular budget.
“We will now discuss together how we can handle unused funds sensibly and carefully and use them for the good of the country,” he added.
Economic analysts say that, given Germany’s economic slump and Intel’s corporate difficulties, it was far from a given that the US investment would happen at all – or was even desirable if it did.
“If the economy here worsens, or the company’s own outlook worsens, I am sure Intel will try to get out of it,” said Dr Christian Rusche, economist at the German World Economic Institute (IW) in Cologne. “Intel is not the most innovative of chipmakers, to put it politely, so rather than bet everything on one firm, I think it would be good if the €10 billion was invested in eastern Germany to create organic projects.”
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The news from the embattled US chipmaker is a fresh blow to the EU’s ambition to produce one-fifth of the world’s semiconductors by 2030.
The €10 billion subsidy from Germany, its largest-ever state investment, was enabled under the EU Chips Act passed last year.
Intel’s postponement announcement came days after Poland received EU approval for its own 7.4 billion zloty (€1.7 billion) state subsidy for another Intel 25 billion zloty (€5.86 billion) plant near Wroclaw.
In both Germany and Poland, opposition politicians criticised their respective governments and demanded Intel deliver guarantees – or else risk losing the land reserved for them.
Poland’s former digital affairs minister Janusz Cieszyński suggested Warsaw had three options: to “negotiate a generous reservation fee with Intel for these two years of waiting”; find a new investor; or abandon the project entirely and use the funds elsewhere.