Sovereignty at Any Cost? The Intel–Magdeburg Dilemma

Executive Summary

Europe’s biggest industrial subsidy tests the limits of strategic spending. In “A Controversial Investment: An Industrial Policy Analysis of the Intel–Magdeburg Subsidy,” we examine Germany’s €9.9 billion grant to Intel — the largest public subsidy ever awarded to a single company in Europe. The project aims to secure supply chains, boost innovation, and strengthen technological sovereignty. Yet the economic, climate, and strategic returns remain uncertain and appear modest relative to the scale of support.

Industrial policy can steer transformation — but context matters. Using the BESTInvest evaluation framework, we find that potential benefits from learning effects, clustering, and innovation could improve competitiveness, but are unlikely to offset Germany’s structural disadvantages: high energy and labour costs, limited local supply networks, and a shortage of skilled workers.

Local spillovers are weak and labour constraints severe. While the project could create up to 20,000 indirect jobs, Magdeburg lacks the semiconductor ecosystem and talent base of hubs like Dresden or Munich. Many positions will likely be filled from outside the region, reducing territorial benefits.

Strategic and climate impacts are positive but limited.
German chip production is cleaner than Asia’s, but still resource-intensive. The project contributes only marginally to Europe’s supply resilience, as leading-edge chips are not central to most EU industries or defence needs.

The real question is opportunity cost. The €9.9 billion subsidy equals what would be needed to raise Germany’s R&D share of GDP to 3.5%. Alternative investments — such as in research, renewables, or energy infrastructure — might yield broader and more durable benefits.

Industrial policy must weigh strategic goals against efficiency. The Intel case highlights the limits of one-off megasubsidies as a tool for sovereignty. Lasting success requires coordinated European action, long-term R&D investment, and transparent evaluation frameworks like BESTInvest.

Policy recommendations

1. Use structured evaluation tools like BESTInvest to assess strategic, climate, and economic returns.

2. Prioritise ecosystem-building over individual megaprojects — support clusters, suppliers, and research networks.

3. Tie subsidies to conditional performance targets on innovation, emissions, and local job creation.

4. Coordinate at EU level to avoid subsidy races and align industrial policy with Chips Act objectives.

5. Publicly compare opportunity costs of large subsidies with alternative uses of public funds.