Intel wants another €3.2b from German gov for Magdeburg mega fab Intel is holding out its cap for billions of euros in German subsidies – on top of what has already been committed – to get its planned Magdeburg "mega fab" back on track. According to local media, Intel executives recently approached the German economy minister in hope of securing an extra €3.2 billion Euros in subsidies on …
Of course it's capitalism! And the explanation is quite simple: since the wheeze project was first mooted, the cost of debt capital has gone up, so the government is going to have to stump up more cash.
This is one of the reasons why large subsidies are generally a bad idea. Not only do they distort competition, but they also simply act to funnel taxpayer money to shareholders (rarely the same due to differential tax rates and locations).
But, really, there is simply not enough ground water, except when the Elbe floods, at the proposed site for it to be feasible without causing serious and longlasting problems to the whole area. And this isn't just about the wildlife, it's about drinking water, subsidence, etc.
... so you have given us billions to build this thing. It would be a pity if all that money would go to waste! How about you give us a bit more and we'll consider actually building it. It would be a pity if you'd loose an election because you wasted all that taxpayer money!
It was a mistake to start offering money, but then they did it before and it also crashed and burned back then. But those politicians love this type of thing: they get to spend other people's money, they get a bunch of excited press releases and photo-shoots, and it works magic if they suddenly are out of a job and try to find a place within some friendly industry.
Time for the government to remember its core functions: pay your teachers, maintain a reasonable social net to keep your society stable, fund the army.
Government grants and subsidies ought to have strings attached, If the promises aren't kept, the money must be paid back. The debt being "owned" by the parent company, not the now bankrupt development company set up just for the purpose of making sure if it goes pear shaped the shareholders don't lose out. Remember, investing in shares is a risk, the value may go down to nothing as well as up. :-)
"How about investing their own money?"
Why? This isnt really an Intel (or others) desire to build there. Intel wants to build a fab, its Germany that wants it there. The US is playing the same game. And yet some people moaned that the UK would be 'left out' of this wonderful opportunity to throw money at intel and others for a fab.
@elsergiovolador
"Maybe if we didn't try tax everyone (except the rich and big corporations) to death, we would have our own companies building the fabs."
It is plausible but we also have more regulations which has a similar effect. I am not sure we would be accepting of China levels of pollution because as a country we have advanced beyond that point and are wealthy enough not to accept it. But our tax burden doesnt help in this country.
The outsourcing of pollution and slave labour has been allowed solely to benefit big corporations so they didn't have to spend money on domestic salaries or make sure their factories have minimal pollution, but rather on dividends and bribes for politicians to keep status quo.
There is something in the middle - come to terms with that employment rights are an illusion and may only exist for higher paid jobs (as it is what's happening anyway - minimum wage worker can't afford to take employer to tribunal and then risk being blacklisted) and that we are not at the state to remove pollution completely. But bringing jobs back home may help not shipping all the tat people buy through half of the world and maybe Winnie the Pooh will not have enough money to build his wunderwaffe - as a bonus.
"It is plausible but we also have more regulations which has a similar effect." So the UK has more regulations than the EU?
"our tax burden doesnt help in this country". You seem to have ignored " (except the rich and big corporations)". Big corporations walked away from the UK when we walked away from the EU, nothing to do with taxation. 19% is not particularly onerous, even if they paid it which they don't.
> Still waiting for your desired apocalypse?
Depends on what you mean by “apocalypse”.
From my perspective, I did a lot of work in Ireland in the 1990s as foreign companies invested there instead of the UK, in part because of the euro-skeptism being exhibited in the UK. So to my mind the UK has lost out as these businesses are now generating revenues in Ireland/EU in direct competition to the UK.
From a personal perspective, losing freedom of working/movement etc. has meant working arrangements are no longer simply an exchange of contracts and jumping on the next flight.
@Roland6
"Depends on what you mean by “apocalypse”."
The end of western civilisation. Or even the guaranteed brexit recession rearranged twice.
"So to my mind the UK has lost out as these businesses are now generating revenues in Ireland/EU in direct competition to the UK."
Without trying to put too fine a point on it 'to my mind' seems right. And not just you but a lot of the hanging on remainers. Some of whom really seem to be upset their apocalypse didnt happen.
@gandalfcn
"like the same ones who told us the EU didn't allow such subsidies."
Which after only mere seconds of effort you will find the EU does not allow unless a carved out exception the EU 'approves' of. As this was a recent carve out it would seem the brexiters were right-
https://www.reuters.com/technology/eu-lays-out-billion-euro-plan-boost-chip-production-2022-02-08/
> would seem the brexiters were right-
And wrong at the same time!
Remember one of the complaints was how inflexible the was, the rules around state subsidy supposedly preventing Westminster investing in the UK…
This shows that correctly presenting a case can result in “the EU” being flexible. Although I suspect in this instance the absence of the UK in the decision making is the reason why Germany were able sway this in their favour.
@Roland6
"And wrong at the same time!"
Nope, right. As per the very comment.
"Remember one of the complaints was how inflexible the was, the rules around state subsidy supposedly preventing Westminster investing in the UK…"
Which would be correct. While I think the gov should invest less in the UK as the gov isnt very good at investment, but the truth stands.
"This shows that correctly presenting a case can result in “the EU” being flexible"
Really? The EU gets in a flap as the US decides to pump subsidies to being fab factories to the US and the EU in its usual green eyes and wishing to be 'one of the big boys' decides to copy. Not forethought or strategy but the usual flailing. And dont assume my opinion is reserved for the EU, this is why I have been consistent that the UK shouldnt be doing something so stupid either. The EU rules are highly flexible or rigid depending who or why it applies. Another reason it is best to be out.
Just sounds like PR fluff bargaining to justify asking EU countries for higher subsidies.
I suppose it looks bad from a distance, but if inflation costs have added 40-50% onto fab pricing, then perhaps it is reasonable to start a conversation about it.
It depends what EU countries want. The global position is that yes, it is far cheaper to manufacture in Asia, but for global security reasons it is desirable to have a global supply chain. If the EU countries want an EU supply chain but will not force companies to buy EU products, then the only way this works is to provide subsidies. Imagine a war breaks out with China over Taiwan, China immediately switches off all electronics export and the subsequent risk to global technology groups is immense. The US recognises this and encourages trading that isn't 80% (or whatever %) based in China.
The EU economy entered the late stage capitalism, if you need throw subsidies at something that there is huge demand for and otherwise profitable.
As Reagan said:
If it Moves, Tax it. If it Keeps Moving, Regulate it. And if it Stops Moving, Subsidize it.
But I guess you can never criticise the gawdly EU, they know what they are doing by taking people money and throwing them and big corporations. There is no need to fix the economy, you can always raise taxes.
@Roland6
"Well I know two wrongs don’t make a right, but he did also break the USSR’s economy…"
The interesting observation after being that the USSR didnt really grow in productivity while capitalism and free markets did considerably. Germany providing an interesting contrast.
"semiconductor demand has declined"
So why build another factory? If you'll only build it with German government money, and there's no demand for it anyway, well then don't build it.
I'm assuming the subsidies Intel are getting are just free money. If they were loans, that's not a problem, because a chunk of Intel's profits would pay it back. If it's just free money, Intel gets to keep any profits they make and the German government gets nothing.
If the banks won't give Intel free money, why do governments feel they need to do it?
If the banks won't give Intel free money, why do governments feel they need to do it?
Well, first we had mask-mania and state enforced business closures that lead to one round of supply chain disruption. Then we'd barely figured that one out and we sanctioned major supplier economies. So Russia, China etc that both have Intel facilities (pun intended). Then we had a little bit of a conflict, where the creators of global supply chain disruption strategies realised a lot of our wunderwaffe, not to mention other industries need chips in much the same way salt cod does.
And the fun doesn't stop. So there's China. Both of them. Or just the one depending on policy interpretations. Taiwan's said it'll destroy it's semi industry if China invades. We're sanctioning China's imports and exports, China could slap punitive sanctions or tariffs on their exports in retaliation. And are neocons are shaping the battlefield ahead of China '25 and a war there. Yey!
And China started getting expensive, so our good'ol capitalists decided to invest in Vietnam. China kinda noticed, so has been busily influencing Vietnam, and other Asian nations. Who've also noticed the way we practice 'diplomacy' and the sanctions game, and don't necesarily want to play by our rules. That penny (or cent) has finally started to drop in the West and there have been campaigns like 'Make America Great Again' to try and reverse the policy of outsourcing, offshoring and the general transfer of IPR to people who might not be our friends any more.
Then of course there's places like this-
https://en.wikipedia.org/wiki/Kiryat_Gat#/media/File:PikiWiki_Israel_16203_kiryat_gat.jpg
Which is home to a lot of high-tech R&D, production and also IWI, IMI and I think some other bits of Elbit. Which kind of explains why Israel's been somewhat reluctant to give stuff to Ukraine given it's got some nasty neighbours, and Iran's been busily demonstrating the capabilities of cheap, easy to produce drones and other weapons.
So there are quite a few reasons why having production capacity closer to home might be a really GoodIdea(TM) just in case facilities in actual or potential trouble spots have a very bad day. Problem is that kind of supply chain, or just national security costs rather a lot of money.
Check out Intel's own financial reports. In 2022, Intel had $182Billion in assets, $143Billion invested Capital, $15Billion Cash Flow, and $11Billion in Cash. They're playing same BS game with the Germans they played with Ohio for that fab plant. Screw the local citizenry to get the government to pay for their investments and keep the wolves of Wall Street / City of London / Tosho fat.
Nein, Intel, Sie haben schon genug aus den Steinen gequetscht!
(no, Intel, you've squeezed enough out of the stones)
Intel has a bloody nerve to ask for more subsidies. Maybe pay less in divvies and invest in your own fab more, and you can get on with building stuff. Demanding freebies/sweeteners from governments is pathetic.
The EU have a €750bn post-Covid slush fund which may or may not contravene competition rules (irrelevant; the EU makes EU competition laws!) which puts Intel asking for another €3bn into context. The article subheading hints at energy being a factor; this plant will have become less attractive the moment Germany lost its Russian energy-daddy and that particular story has barely started to play out for the industrial sector of the German economy.
Brexiteers did lie and bullshit an awful lot. The key to understanding their position is to accept the fact they are a bunch of insecure over-promoted selfish toffs that hold the plebs (ie: most of us) in contempt and will destroy everything that stands in the way of them keeping their noses in the trough.
My 5 cents of what I know and how I think of this personally:
It is important to let all readers here know that the high end already have been covered: TSMC is producing very efficiently. The pain is in the regular electronic devices: MOSFET's, Opamps, Voltage regulators, Bipolar transistors, Logic etc. Waiting for parts from an order given 2 years ago (!). In the high-end stuff you already see decline.
Intel should keep up their own pants and plan down properly, without these extreme demands. Otherwise, this will become a kind of unprecedented sponsored industry we never had before, and.... it will fail. It does not fit in our liberal western open way of doing business. Companies should grow and exist from the results they have created, and not being sponsored bottom up. Otherwise we are no better than Xi Ping in China, right ? With his idiotic plan... Which fails... Right. Point proven ;-)
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