Additional German subsidies for Intel are possible if electricity prices significantly rise

Misha Lu, DIGITIMES Asia, Taipei 0

Credit: Intel

With Intel and TSMC investing in Germany, energy subsidies alongside subsidies, have become a focus. For Intel's planned 20A and 18A processes in Magdeburg, Saxony-Anhalt and TSMC's planned 28/22 nm and 16/12 nm processes in Dresden, Lower Saxony, the two chipmakers are expected to receive EUR 10 billion and EUR 5 billion in subsidies, respectively. As revealed by the German media Handelsblatt, however, Intel also sought state aid from Berlin if electricity prices surpass a certain threshold, but to no avail.

Seeking to maintain an average electricity price of around 10 cent per kilowatt-hour for the coming 20 years through purchase guarantees, Intel is currently in discussions with several energy providers in Germany, reported Handelsblatt, citing government sources. Though Intel managers reportedly requested further state aid if electricity prices exceed a certain level, the demand was refuted by Germany's Ministry for Economic Affairs and the Chancellery. Instead, a negotiation clause (sprechklausel) was agreed, allowing Intel to approach the federal government for additional state aid if electricity prices rise significantly, though the government's agreement is not guaranteed, according to Handelsblatt. In addition, the clause only applies when the price increase is beyond Intel's control, as in an energy crisis.

As Udo Phillip, Germany's State Secretary at the Federal Ministry for Economic Affairs and Climate Action, indicated to Handelsblatt, "Regarding securing future electricity prices, it is agreed that the federal government is prepared to engage in discussions with the company to seek solutions and examine support possibilities." When it comes to TSMC, according to Philip, there has been no agreement with the federal government regarding electricity prices. Intel's deployment of EUV lithography equipment on its German site to support cutting-edge nodes can be partly attributed to the company's concern with electricity prices.

Amid the country's ongoing transition from fossil fuel to green energies, the coalition government in Berlin has been caught in internal quarrels regarding the best way forward. Germany's Economy Minister Robert Habeck indicated in July that the country faced a major transformational period until 2030, and called for a cap on electricity prices for energy-intensive companies to prevent production from moving abroad, especially in light of the low energy costs in the US and the ample subsidies available under the Inflation Reduction Act. German Chancellor Olaf Scholz, however, has so far resisted the idea.

The country's high energy prices have been held responsible for the ongoing economic recession gripping the country. To cushion consumers and industry from the impacts of the energy crisis triggered by the war in Ukraine, Germany's parliament approved a EUR 200 billion debt-financed package in October 2022 to cap natural gas prices, and voted to suspend Germany's constitutional debt brake. Christian Lindner, Germany's Finance Minister, revealed in July that only EUR 52 billion out of the EUR 200 billion fund had been used, but ruled out using the remainder of the package on subsidizing electricity prices for energy-intensive industries.