Intel has expansion on its corporate mind.
Intel’s bringing more than chips to the Berlin table with a 30-billion-euro investment in Magdeburg. The Germans chipped in too, covering a third of the cost. Looks like Chancellor Scholz and CEO Gelsinger are now chipper too with the agreement. We’ll have to wait a few years for tasting the first batch, though.
The investment is seen as a way to reduce Europe’s dependence on chip imports from Asia. Currently, Europe imports about 90% of its chips, and this dependence has been a major vulnerability for the European economy. The investment by Intel is a step towards reducing this dependence and making Europe more self-sufficient in terms of chip production.
Intel Invests in a Bolder Strategy
Intel and Germany entered into an agreement in mid-June 2023 to cooperate on a chip manufacturing site in East Germany.
This is a part of the company’s initiative to turn its ship around and head toward growth. The firm has not fared well with competitors like AMD, Nvidia, and others stepping into the sector and taking market share.
These other firms have done a fantastic job of executing and bringing products to the market. A sign of significant progress and growth is present in the share prices of AMD and Nvidia. They have significantly boosted their respective share prices over the past four years.
Meanwhile, Intel has not reported great financial results and has not been able to keep up with competitors. It is in this more highly competitive market that Intel has to operate. The firm has had to rethink how it works and what it needs to focus on today.
One key part of the plan to bring Intel back to life is to return to the basics and increase its manufacturing facilities. To that end, it has already started work on a $20B facility in Ohio, and it expects to have one in Poland as well.
Intel has already purchased land to build the manufacturing facilities. The technology firm expects to have two production centers. The first one should start production by 2027 or by 2028.
Not a Done Deal
The deal is not fully set in stone as of yet. The California-based company must wait until they obtain blessings from the executive branch of the EU.
The signals from the EU show that they are likely to approve this deal.
Significant Benefits For Intel and Europe
It appears that it would be a significant benefit to Germany and Europe to have more of a core role to play in the technology sector. At the same time, Europe can benefit by having more production centers in the region as opposed to relying on external providers to supply their needs.
A few other potential benefits of the partnership:
- It could help to create a more resilient European chip supply chain.
- It could lead to the development of new chip technologies in Europe.
- It could help to create a more competitive European semiconductor industry.
- It should also help to bring about more well paid technology jobs and help to spur more economic activity in the region.
- More economic activity in the region will be crucial as Europe has been facing various headwinds to GDP growth.
The partnership is still in its early stages, but it has the potential to be a major driver of economic growth and innovation in Europe.
Is Now the Right Time To Build in Europe?
The move may come as a surprise to many because of the perceived increasing level of instability in the region. The conflict in the region seems to be in full force and has not shown any signs of slowing down.