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SEMICONDUCTOR INDUSTRY Intel makes its move into Magdeburg, Germany

From Simon Morrison Reading Time: 6 min

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Will the Magdeburg Intel factory keep Germany on top of the European chip market? With a freshly inked contract, Intel and Germany are establishing Magdeburg as the site of one of Europe’s major semiconductor factories. After months of wrangling, the 33-billion-euro project has been finally signed off on. Will this be the start of Europe breaking away from the grip of the Asian microchip behemoths?

In terms of semiconductor production, Germany leads the pack in Europe.
In terms of semiconductor production, Germany leads the pack in Europe.
(Source: stockphoto-graf -

Germany has teamed up with Intel to position itself as a global powerhouse in the semiconductor industry. On June 19th, 2023, German Chancellor Olaf Scholz and Intel CEO Pat Gelsinger signed the accord that will release subsidies to fund the construction of two cutting-edge semiconductor factories in the city of Magdeburg, Saxony-Anhalt.

The German government hopes that Intel’s investment in Magdeburg will revitalize the once-thriving industrial city with the expected creation of around 10,000 jobs. The Bundestag also hopes that the factories will help make Germany (and by extension Europe) less dependent on Asia for its semiconductor needs. For its part, Intel is looking to displace TSMC and Samsung from the top of the microchip mountain. Expanding its European production capabilities is a key part of this strategy.

Concluded after an intense and grueling negotiation period, there is now mounting criticism of the deal. Intel is also facing newly reenergized Taiwanese and Korean semiconductor sectors. Are the Magdeburg chip factories going to give Germany and Intel a magic touch when it comes to microchips?

Why did Intel move to Magdeburg?

The city of Magdeburg has a long history of regeneration and reinvention. Magdeburg was founded by Charlemagne in 805 and has seen itself at the center of historical turbulence ever since. The city was a Protestant stronghold during the Reformation, was completely destroyed in the Thirty Years' War, found itself crowned the capital of Saxony in the Napoleonic Wars, was razed to the ground again during World War Two, and then functioned as a hub of East German heavy industry during the DDR.

Reunification saw Magdeburg named as the capital of Saxony-Anhalt. But despite a good economy when compared to other former East German cities, Magdeburg has struggled to regain its former glory. Although companies like Amazon have established bases in Magdeburg, it failed to lure in BMW in the early 2000s. The venerable old heavy machinery powerhouse is suffering from low employment and stagnating. But this 1200-plus-year-old city just might see its fortunes change for the better with the arrival of Intel.

There are many reasons why Magdeburg was an attractive choice for Intel. The city is just two hours drive from Berlin and just a little further along to Dresden, another chip-making hub. The city is also well connected to the rest of Germany by the autobahn, train, and waterways. Magdeburg threw its hat into the ring for the Intel factory by showcasing its excellent infrastructure, a skilled and eager workforce, and available farmland already earmarked for industrial development. A major point in Magdeburg’s favor was the 380 kV power line and gas supply running through the proposed site.

After an intense period of negotiations, Intel announced that Magdeburg would be the site for its new semiconductor plants. Magdeburg managed to beat out rival cities in Bavaria, Mecklenburg-Vorpommern, and neighboring Saxony. Intel had its German semiconductor site. But the deal was far from done.

Intel’s long road to Magdeburg

As far back as 2020 Intel was talking about expanding its operations in Europe. The company was expected to announce the European location of two new chip fabrication plants at the end of 2021 but remained frustratingly silent. Insiders had made it clear that Germany was at the top of Intel’s list, however, the exact whereabouts of the proposed factory were still in doubt. Some analysts believed that the company was waiting for the European Chips Act to pass into law. Others wondered if Intel wasn’t delaying just to squeeze the largest number of subsidies out of the Bundestag.

Whatever the reasoning, it wasn’t until March of 2022 that Intel stated publicly that Magdeburg was its city of choice. Originally, construction on the semiconductor factories was to begin in the first half of 2023 and be completed in 2027. Then in December 2022, those plans ground to a halt.

Why was Magdeburg’s mega-fab factory put on hold? Money. Intel put pressure on the German government to pony up more euros for construction costs. Intel maintained that the original estimate of 17 billion euros had blown out to 20 billion and wanted Germany to pick up the shortfall. According to Intel, inflation, recessions, rising energy costs, increased cost of raw materials, and a dip in the demand for semiconductors were all pushing up the price of the construction.

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Initially, Germany stated that it was willing to invest up to 14 billion euros into the Magdeburg Intel plants. The amount the Bundestag actually settled on was 6.8 billion euros. Which, it turned out, wasn’t enough for Intel. The German government balked when pushed for more cash. Matters weren’t helped when industry analysts began to speculate that Intel was exaggerating the impact of rising energy costs and simply fishing for more capital. And so began months of drawn-out political wrangling. Over a year later, the final construction costs have been estimated at 30 billion euros. The German government has wound up offering subsidies of approximately 10 billion euros, although the exact figure hasn’t been announced.

The Intel press release praised the German government for recognizing ‘…the expanded scope and change in economic conditions since the site was first announced.’ During the public singing ceremony, Chancellor Olaf Scholz called it an ‘Important step for Germany as a high-tech production location’ and described the deal as ‘Good news for Magdeburg, for Germany and for all of Europe.’ Intel CEO Pat Gelsinger released a statement that said, ‘Building the 'Silicon Junction' in Magdeburg is a critical part of our strategy for Intel’s growth.’

Criticism of the Intel mega-fabs in Magdeburg

Alongside the obvious entanglements around the size of the subsidies, there are other criticisms of the Intel factories in Magdeburg. Industry experts are dubious that the plants will reduce the dependency on Asia for semiconductors. Jan-Peter Kleinhans from the New Responsibility Foundation has said that ‘To believe that more plants in Germany will make us less dependent on Asia is a fallacy.’ Chemicals and machinery will still need to be sourced from Japan, Taiwan, and the US.

The fact that the chips produced won’t be suitable for use in Germany’s massive automotive industry is also raising concerns. While current generation chips are set to be crucial for cars produced from 2035 onwards, Intel maintains that the Magdeburg factories will produce only the very latest generation of semiconductors.

Whether the decision will pay off for Intel, the City of Magdeburg, Germany, and Europe remains to be seen.

Who are the microchip industry leaders in Europe?

In terms of semiconductor production, Germany leads the pack in Europe. More companies in Germany produce semiconductors than in any other European nation. At the time of writing, 358 of the 470 semiconductor factories in Europe are in Germany. The German semiconductor industry stood at the top of the list in 2022 with export trade value and exported products worth US 19.8 billion. Trailing Germany are Ireland, France, and the Netherlands.

When it comes to sales figures, the Netherlands is in first place with ASML having an estimated US $266.65 billion 2023 market cap. Germany’s Infineon comes in second with a market cap of US $50 billion. As impressive as these figures are, they pale in comparison to the Asian semiconductor giants. For the same accounting period, China, Taiwan, and Hong Kong alone accounted for about US $522 billion in export trade value.

The 2023 market cap estimation for the Taiwanese semiconductor company TSMC was US $514.69 billion. Intel’s estimation is currently US $137.16 billion.

European Microchip Industry Leaders

Export Trade Value 2022



US $19.8 billion



US $11.9 billion



US $9.8 billion



US $5.2 billion



US $2.5 billion

United Kingdom  

US $2.1 billion


US $1.8 billion



US $1.3 billion