FILE PHOTO: Intel logo is seen near computer motherboard in this illustration taken January 8, 2024. REUTERS/Dado Ruvic/File Photo
ASTANA (Reuters) -German Chancellor Olaf Scholz said on Tuesday that Intel is committed to its plan to build plants in eastern Germany despite the U.S. chipmaker saying that it is delaying construction by two years as part of its cost-cutting plans.
"The decision to postpone the project in Germany for two years is a decision that also includes the intention to stick with it," Scholz said in Astana.
"It is important for us that we take this opportunity in this very volatile business of the semiconductor industry to help ensure that there is nevertheless a further expansion of the already profound capacities in Germany," he said.
Intel CEO Pat Gelsinger released a memo to employees on Monday outlining a number of steps the company would take to revive itself, which included pausing construction at its project in the city of Magdeburg for two years.
"This is now a purely business decision that has to do with corporate policy," said German Economy Minister Robert Habeck on Tuesday, adding that Germany was still committed to building up semiconductor production in Europe.
Habeck's ministry said in a statement that it was "now up to Intel to quickly get back on a path that enables investment."
The decision by Intel also triggered a budget dispute within Germany's ruling coalition, with the finance ministry saying funds no longer needed for Intel subsidies should be used to balance the books and the economy ministry pushing back.
Commenting on the dispute on Tuesday, Scholz said his coalition government would now jointly discuss "how we can use unused funds sensibly and carefully."
Economists said the unused funds should be used for tax reform.
"In macroeconomic terms, it would be right in the current situation to use the funds for additional investments or investment incentives, for example through tax credits," Moritz Schularick of the IfW economic institute told Reuters.
Friedrich Heinemann of the ZEW economic research centre said that the "money would be much better invested as a basis for an investment-friendly tax reform that benefits all companies, including the ones that are not in the short-lived spotlight of political attention."
(Reporting by Andreas Rinke, Christian Kraemer and Rene Wagner, Writing by Friederike Heine, Editing by Rachel More and Miranda Murray)
