Magdeburg politicians raise concerns about possible Intel fab cancellation — plans drawn up for anchor investor withdrawal (2024)

Uncertainty regarding Intel's fab building commitment in Germany has started to ratchet up over recent days. The PC chipmaker has been preparing an expansive site for two very large advanced chip fabs near Magdeburg. However, given the context of the firm canceling investments in Italy and France last month, plus the disastrous losses announced earlier this month, the local Saxony-Anhalt state government is understandably worried. According to some reports, the local government is planning contingency moves, should Intel pull out, but without the 'anchor investor' (i.e. Intel) the whole commercial / industrial zone could collapse.

Intel's silence about its massive Magdeburg investment plans must be deafening for the local politicians. With its current financial troubles, the commitment to its multi-billion investment in Europe might be tempting for Intel to shrug off. Construction plans in the EU remain in their early stages, unlike some other building project commitments in Ohio. However, Intel CEO Pat Gelsinger has previously been bullish about the ambitious Magdeburg fabs making a big difference in Europe. This flagship investment would deliver Intel fab technology at the heart of Europe with chip technology "in the 1.5nm range," the CEO boasted earlier this year.

It is good business to have a plan B (and C, and perhaps D), so the reports of the local government preparing for an Intel U-turn on its Magdeburg investment shouldn't cause undue alarm. Whether the whole project could recover from the withdrawal of its so-called 'anchor investor' is another question. The reported contingency plan of the "marketing of the space to alternative industrial and commercial companies," sounds rather vague and weak considering what is at stake. Without Intel's presence, the big question is what other companies would want to fill spaces in the surrounding industrial area? Projected investments and rents would be seriously impacted.

One of the big concerns for the local government administration that covers the Magdeburg area is that it has already invested / committed millions of Euros in this industrial project. Golem's report quoted the Left Party leader Eva von Angern as complaining that "The state government is playing poker with Intel and investing millions without having any firm guarantee." Moreover, von Angern highlighted the dangerous prospect of Intel failing to develop at Magdeburg and the state government being left with a large bill.

One example of a large government project already underway to support the Intel-centric industrial park is a €3.9 million ($4.3 million) investment in improving State Road 50 (widening, and adding cycle lanes).

For now, those hoping for Intel to follow through in Magdeburg should perhaps comfort themselves with the old proverb 'no news is good news' as no official statement has come from Intel regarding the cancellation of its fab plans in Germany. Remember, the US chip maker is promised payments of up to about a third of the €30 billion ($33 billion) construction costs via European Chips Act funding. This is a good incentive for Intel to continue with the project, especially if it can front-load the support payments.