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Intel is officially a landowner in Germany

The US chip manufacturer has big plans for Europe and Germany in prearticular. The German city of Magdeburg won the lottery when Intel earlier this year announced that it would invest EUR 17 billion euros in a “leading-edge semiconductor fab mega-site”.

Some time has now passed since Intel's CEO, Pat Gelsinger, announced an investment program centered around “balancing the global semiconductor supply chain with a major expansion of Intel’s production capacities in Europe”. 

As part of this program, Intel said it would invest EUR 17 billion, and create 3,000 direct jobs, with the development of two first-of-their-kind semiconductor fabs in Magdeburg, Germany. The company said at the time that is expected construction to start in the first half of 2023 with production currently planned to come online in 2027.

Now, this week the US company took a big step forward in the process. Intel signed the purchase agreement to become a landowner in Magdeburg, Germany, according to an update from the company. 

Given that 80 % of the industry's capacity is currently concentrated in a single, constrained geographic area, semiconductor manufacturing is particularly vulnerable. Intel's investments in Europe and at home in the US are a steps towards diversifying its operations geographically and strengthening the supply chain in general.

In the update, Keyvan Esfarjani – Executive vice president and chief global operations officer at Intel – writes that this is not something that anyone solves overnight – or in a few years either for that matter. Semiconductor facilities of this scope and size take three to five years to build.

“We believe Europe and the U.S. are regions that can support and would benefit from stronger semiconductor ecosystems,” Keyvan Esfarjani writes in the update.

Intel first announced its plans for Germany and Europe back in March 2022, and since then a lot has happened. Geopolitical challenges have become greater, semiconductor demand has declined, and inflation and recessionary pressures are disrupting the global economy.

“We must acknowledge the abrupt change in the environment while investing to help rebalance the global silicon supply and prepare for the future. Our hope then – and now – is that we can grow our U.S. and EU manufacturing capability and help create a more vibrant and healthier chip ecosystem.”

As pointed out in a recent report by the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG), semiconductor demand is projected o increase 5% every year until 2030, at that time the semiconductor industry is expected to have a total addressable market of USD 1 trillion. Which would mean double what the market demand is today.

Esfarjani continues to state that Intel is closely observing market developments and collaborating with government partners to determine how to effectively promote its ambitions in Magdeburg and at home.

“Accordingly, we will time big expenditures to meet market needs. This is a careful balance that requires public-private cooperation across much of the semiconductor industry on a scale not seen in decades. We cannot wait for market demand to return before investing in the capacity we’re going to need tomorrow,” Esfarjani concludes.

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June 13 2024 1:49 pm V22.4.55-1