The German government reportedly indicated it is only willing to up subsidies offered to Intel for building out a €17 billion chip manufacturing plant in the country if the company is willing to increase its own investment.

Intel announced in March 2022 it would spend more than €33 billion on boosting chip manufacturing in Europe, the first phase of a wider €80 billion investment into the sector over the next decade.

As part of the plan, the company pledged to plough €17 billion on a “mega fab” factory, consisting of two semiconductor plants, in Magdeburg, Germany.

According to the Financial Times’ sources, Intel is looking to secure subsidies worth at least €10 billion, up from €6.8 billion offered, due to rising energy and construction costs.

However, the German government is apparently pushing back and would only do so if the company met it halfway and also committed to more investment.

Sven Schulze, economy minister for the eastern state of Saxony-Anhalt (of which Magdeburg is the capital), said it was logical if the “scale of investment is increased, then the level of subsidy would also rise”.

Intel is seeking more aid at a time when it has come under financial pressure, due to a slump in sales which has meant it will curb spending in 2023.

Germany’s subsidies are being made available to Intel through the EU Chips Act, a $43 billion fund to boost the continent’s chip industry, so an increase in anything offered to Intel will also have to gain EU approval.

The Magdeburg factory is due to be in operation in 2028 and will create 3,000 permanent high-tech jobs in the country.