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Intel’s European expansion will solidify future chip supply chain
Source: Jon Gold


Intel's announcement of plans to open two leading-edge semiconductor fabrication sites near Magdeburg, Germany, is a signal that the chipmaking giant plans to focus on safeguarding its supply chain against future geopolitical shocks.

The company said on Tuesday that it plans to break ground on the Magdeburg facilities in the first half of 2023, with chip production to begin in 2027. Intel will spend €17 billion (US$18.6 billion) on the new fabrication plants, as well as up to a further €16.5 billion on additional projects that include expansions of its existing fabrication facilities in the Republic of Ireland, a new R&D plant in France, and additional build-outs of several kinds of plants in Poland, Italy and Spain.

Intel expects the construction of the Magdeburg facilities to employ about 7,000 workers, and provide 3,000 new permanent jobs once they are both up and running.

According to Gartner vice president of emerging technologies and trends Gaurav Gupta, some of the expansion of Intel's European presence was expected and had been in the works for some time — but other parts weren't so widely predicted.

"Ireland and Germany are sort of different," he said. "Ireland was sort of there in the long-term planning, but Germany is new, and I think the reason is that we're seeing the current trend toward IC [integrated circuit] self-sufficiency."
Government funding helps spur expansion

Intel's announcements of European expansion plans come hard on the heels of news in January that the company plans to invest $20 billion in two new chip manufacturing plants in Ohio. Those US expansions are partially backed by the CHIPS for America Act, which passed as part of defense spending for the country's fiscal 2021. The CHIPS Act provides $52 billion in funding for the expansion of the domestic semiconductor industry, and, according to a Gartner analysis, is a key factor in driving new investment in US chip fabs.

The European Union followed suit shortly thereafter, with the European Commission announcing last month that a European Chips Act would make €15 billion available until 2030 for semiconductor industry expansion. The precise extent of any funding Intel will receive from either chips act is unclear, but Gupta said that the government policies are a likely factor that prompted the company's new expansions.

"It's about leveraging those government funds at the same time," he said.

In a statement announcing the news, Intel CEO Pat Gelsinger acknowledged the EU    initiative, and highlighted the importance of bolstering the supply chain for chips. "The EU Chips Act will empower private companies and governments to work together to drastically advance Europe’s position in the semiconductor sector," he said. "By significantly increasing its manufacturing capacities across the EU, Intel would lay the groundwork to bring various parts of the semiconductor value chain closer together and increase supply chain resiliency in Europe."

Intel's big new construction plans won't do much to alleviate the current chip shortage however, said Gupta, who said that the present headache will be long in the past by the time the new chip fabs come online.

"There's two reasons for that — there's some demand softness, especially for some of the applications for which we saw increased demand during COVID, like smartphones," he said. "[And] on the supply side, we have some new capacity coming online."

That said, certain types of silicon, including that required for enterprise-grade networking chips and power management ICs, could continue to have poor availability in the future, Gupta noted.


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