Intel invested 80 billion euros in Europe, and the EU's "strong core agent" began to bear fruit

On March 15, chip giant Intel announced that it will invest 80 billion euros in the next ten years to build or expand the complete chip industry chain including research and development, manufacturing, packaging and testing in Germany, France, Ireland, Italy and other EU countries.

For the European Union, which is deeply affected by the chip crisis and is committed to upgrading the status of the global industrial chain through the Chip Act, Intel's super hand is undoubtedly a timely rain.

However, this is also a latest annotation to the further regression of the globalization of the industrial chain to regionalization.

Intel vs. EU: Take what you need

Specifically, Intel will invest 33 billion euros in the first phase, of which 17 billion euros will be used to build a new fab in Magdeburg, Germany, about 12 billion euros is expected to be used to expand the Leixlip plant in Ireland, and about 4.5 billion euros is planned to build a new chip factory in Italy, in addition to the expansion of the Gdansk laboratory in Poland and the new European research and development center in France.

Among them, the Magdeburg plant in Germany and the Irish plant will be used to produce advanced process nodes such as Intel 20A and Intel 18A (that is, 2 nanometer process), while the Italian factory will still focus on mature process nodes represented by Intel 4 process (that is, 7 nanometer process).

Intel's choice to make large investments in Europe is well documented. In the middle of last year, the news about Intel's top management sites in cities in northern Germany has long been in the news, and this move is also an important part of Intel's IDM 2.0 strategy.

The IDM 2.0 strategy was first proposed in March last year by Intel CEO Pat Kissinger. The core of the strategy is composed of a trinity of "Intel factory + third-party production capacity + foundry services", that is, Intel still regards the ability of the whole industry chain of design, manufacturing and packaging as its core competitiveness, which is completely different from other chip giants that outsource production capacity to processing companies represented by TSMC.

The first investment in IDM's 2.0 strategy was a $20 billion new fab in Arizona, in the United States. The only surprise is that Intel's new strategy is generally not expected to focus on Europe across the ocean — but it seems reasonable to consider the olive branch that the EU has thrown out early.

On February 8 this year, in order to reverse the decline in the Internet, IT and other technology fields, the European Commission introduced the EU Chip Act. In addition to the bureaucratic planning part, the most attractive beginning of the bill is to lift almost all state subsidy restrictions in the chip field, allowing member states to decide on their own subsidy amounts to attract investment, and the EU side plans to allocate 43 billion euros for direct financial subsidies.

In the case of Intel's new plant in Magdeburg, Germany, the most important investment package, although the German government has not finalized the final details, it is expected that 5 billion euros of the 17 billion euros will be returned in various forms of subsidies, and eu-wide subsidies are expected to be at least as high as 8 billion euros.

The EU's strong core agent is starting to pay off?

For the EU, Intel's first investment will create at least 5,500 direct jobs, and according to CEO Kissinger, the EU will have "a world-class chip ecosystem across europe."

Since the outbreak of the supply chain crisis caused by the new crown epidemic, Europeans who cannot play an important role in the global chip industry chain have always faced the risk of disconnection. In particular, Germany, which is a country founded in the automobile industry, had to be shut down many times in the early stage of the epidemic because of the supply of automobile chips, so that the German economy minister even had to personally go to Taiwan to consult directly with TSMC.

The russian-Ukrainian conflict, which has lasted for a month, has exacerbated the chip crisis, especially since Ukraine supplies nearly 70% of the world's electronic specialty gas: neon gas. In the past two weeks of the auto company earnings season, car companies, including Volkswagen and Mercedes-Benz, have experienced sales declines, and they all blamed the chip crisis.

The resulting EU Chip Act is based on the idea of increasing the global share of the EU's chip production from the current 10% to 20% by 2030, and the bill was personally issued by European Commission President von der Leyen.

As a "bulk quasi-state" and a vast bureaucratic apparatus, the EU has issued many similar bills in the past few years to directly intervene in economic affairs. Examples include the European Battery Alliance, which is trying to poach market share of automotive power batteries from Asian manufacturers, the European Cloud Initiative, which is trying to compete with Silicon Valley giants, the European Hydrogen Strategy, which wants to lead the next generation of new energy, and the Joint Defense Agreement "Permanent Structural Cooperation" (PESCO), which seeks to take military capabilities into its own hands.

However, on the one hand, because these bills have only been issued for two to three years, on the other hand, the EU does owe too much in the fields of power batteries, chips, cloud computing, etc., and the implementation of these bills has not been optimistic so far.

Take, for example, the EU Chip Act, which seeks to attract foreign direct investment from TSMC, Samsung, and Intel. In particular, TSMC, the world's largest chip foundry, has always been a company that the EU has been trying to win. Earlier, TSMC announced that it will invest $12 billion in a new plant in Arizona and plans to build another plant in Japan, which is also the first time that TSMC has made a large overseas investment.

The Europeans, who smelled the opportunity, did contact TSMC at the first time. TSMC Chairman Deyin Liu announced last summer that he was considering building a new chip factory in Germany, but has not since followed.

Even Intel, which is more Europe-friendly and has massively expanded capacity, said last year that new plants in Europe are about 30 to 40 percent more expensive to build than in Asia. Obviously, this part of the cost will now be paid by the EU and the German government.

EU regionalization, not globalization?

Regardless of whether the EU and Germany's €5 billion or €8 billion subsidies are worth it, at least Intel's presence is the first shot in the way of the EU Chip Act, which has only been in place for a month.

While Europeans are celebrating the re-pinching of the industrial chain in their own hands, this is also a note to the triumph of regionalism.

Among the series of bills introduced by the European Union in recent years, another one that has similarities with the Chip Act is the European Battery Alliance.

Over the past decade, the production capacity of power batteries has been concentrated in three countries: China, Japan and South Korea. But with the rise of electric vehicles and the demand for energy storage technology brought by new energy sources, Europeans are doing everything possible to support local companies and attract foreign companies to expand local battery production capacity.

With subsidies of more than 20 billion euros, there are currently more than 25 super factories that have been planned and approved in Europe, and in addition to old players such as Volkswagen Group, there is no shortage of emerging companies such as Terrass and Northvolt. According to the short-term plan, it is not difficult for the EU to complete the self-sufficiency of most power batteries by 2030.

In the traditional high-end manufacturing field where Europe has technological advantages, on the one hand, the EU has given aircraft manufacturers such as Airbus Group a large order through PESCO and German-French-Spanish defense cooperation to ensure that the field is not subject to Us enterprises, and on the other hand, it has released the merger of Alstom and Bombardier in the field of rail transit to cope with possible competition from CRRC Group.

Even in the more assertive software and IT fields in China and the United States, Europeans are determined to break away from external dependence and stand on their own feet. For example, the European cloud represented by Gaia-X is an attempt to replace Amazon, Microsoft and Alibaba Cloud, and the 20 billion euro "Artificial Intelligence White Paper" hopes to establish a trusted artificial intelligence framework independent of China and the United States.

Europe's power battery gigafactory planning has been quite successful. Image source: CIC

On March 22, the first batch of new cars from Tesla's Berlin Gigafactory, known as the "Lighthouse Project", will be officially delivered to users, and Berlin believes that the successful commissioning of the Tesla factory will become a positive example to attract more investment. For multinational enterprises, the layout of China, the United States and Europe in triplicate may gradually become the norm in the future. A month ago, German chip company Infineon invested 2 billion euros in Silicon Carbide and Gallium Nitride capacity in Malaysia, but it was attacked by German domestic public opinion for not paying enough attention to local interests – a scenario that was unimaginable a decade ago.