To address future demand for semiconductors amid severe chip shortages of 2020 – 2022, all leading chipmakers announced plans to build new fabs and even disclosed their estimated costs. But spiraled inflation, caused by the disruption of supply chains by the pandemic and then by the Russian war against Ukraine, increased costs of fabs for Intel and Samsung by billions of dollars, according to reports.

When Intel announced plans to establish a new manufacturing site near Magdeburg, Germany, last year, it said that its first production fab and supporting facilities would require investments of $18.7 billion (€17 billion) and negotiated $7.2 billion of state aid. But because of high inflation, increasing costs of materials, and high energy prices, the company now believes that the initial investment would be around $31.675 billion (€30 billion). According to a Bloomberg report last week, it would need $4.223 billion – $5.279 billion (€4 billion – €5 billion) more state support. 

Intel confirmed that it was re-negotiating the support package with the German authorities because of increased fab costs, but they did not confirm the exact sums it sought.

"Disruptions in the global economy have resulted in increased costs, from construction materials to energy," a statement by Intel reads. "We appreciate the constructive dialogue with the federal government to address the cost gap with building in other locations and make this project globally competitive."

When completed later this decade, Intel's fab in Germany will be one of the most advanced semiconductor facilities in the world. Given the timeframe for starting production, it will likely use sub 1.8nm (post Intel 18A) fabrication processes to make chips for Intel and its customers of its Intel Foundry Service division. 

Intel is not the only company to suffer from higher-than-expected fab costs. As it turns out, Samsung estimates that its initial investments in its upcoming fab near Taylor, Texas, will total over $25 billion, up more than $8 billion from initial forecasts, according to a Reuters report that cites three people with knowledge of the matter. 

While wafer fab equipment accounts for the lion's share of fab costs and these tools are gradually getting more expensive, construction cost was the main reason the Taylor, Texas, fab got more expensive. Meanwhile, Samsung wants to build the fab sooner rather than later since it expects further cost increases.

"The higher construction cost is about 80% of the cost increase," one of Reuters's sources is reported to have said. "The materials have gotten more expensive," the source added.

Samsung is looking forward to completing the construction of its fab in Taylor, Texas, in late 2023 or early 2024. After it moves into the production tools, it will start making chips at the production facility in 2024 – 2025, presumably using its 3nm and 4nm-class process technologies.

Comments Locked


View All Comments

  • mode_13h - Tuesday, March 28, 2023 - link

    OMG, this again.

    Inflation has hit nearly all countries. Inflation in the US has actually been *lower* than in most.

    If you look at the *data* on inflation, you can clearly see the sharp uptick, in countries around the world, at the point where Russia launched its invasion.

    My advice: stop getting your news from sources with a clear political agenda.
  • AnnonymousCoward - Tuesday, March 28, 2023 - link

    Do you think handing thousands of dollars to nearly everyone will have no effect? Come on. Inflation is too much money chasing too few goods. Why would you ignore the "too much money" portion? And where's the political agenda.
  • AnnonymousCoward - Wednesday, March 29, 2023 - link

    If it helps you understand, imagine a more extreme example: $50k is handed out to every American household. People would be buying new cars left and right and dealers would raise prices drastically, and people would still pay it. People would also buy new computers, video cards, and all sorts of other stuff. Companies would easily jack up their prices since people have so much cash. People's buying power would be really high initially, but much worse in the longer run when their short-term cash runs out and prices stay inflated. That's where we are now. A bag of Doritos costs nearly 5 bucks and you get 2/3rds the amount. Home prices are up 50% where I live. RTX4070's sell for $800. If you like this, vote accordingly (Democrat).
  • mode_13h - Thursday, March 30, 2023 - link

    > imagine a more extreme example

    We're not *in* that imaginary world. Real-world macroeconomics typically defies thought experiments. It's a complex system, a bit like biology. You need to be data-driven, if you want to have any chance at understanding what are truly the dominant factors.

    I'm not defending government handouts, but I think some of the pandemic assistance was justified. The main thing that bothers me is motivated reasoning. And I see a lot of that going on, trying to leverage public dissatisfaction with high inflation to support a political agenda.

    If you take the hypothesis: "inflation was caused by too much government government handouts", then you should test that against other countries with more and less government support. You should find a very direct correlation between the amount of handouts and the inflation rate. Yet, the data doesn't align with this, at all. The countries currently suffering the highest inflation often had little or no government support.

    The other thing you can do is test the hypothesis that Russia's invasion of Ukraine is contributing to inflation, and look at the inflation rate shortly before & after, in a variety of different countries. Those most heavily dependent on Russia or Ukraine for food, fuel, or fertilizer suffered the greatest shocks, but the effects of global trade meant these commodities got more expensive everywhere. There are other key raw materials & industrial components that were also disrupted by the war, such as helium, which is a critical input for chip manufacturing.
  • AnnonymousCoward - Friday, March 31, 2023 - link

    Thanks for your thoughtful insight.

    This is definitely a complex problem and not obvious to understand cause-and-effect. Now, regarding your comment "The countries currently suffering the highest inflation often had little or no government support." - I'm sure it depends on how much is imported and exported, and how much new loose cash enters the market.

    It seems to me that covid shutdowns impacted supplies of many things, and then the federal government injecting trillions including literally handing thousands to everyone just increased the numerator of the simple inflation equation. I suspect the effect propagated worldwide due to the global economy.

Log in

Don't have an account? Sign up now