Ireland ends aid to Intel plant after EU pressure
The Irish government has been forced to scrap a proposal to provide US semiconductor giant Intel with a multi-millioneuro grant to build a new 6,000m2 next generation chip making plant in the country following pressure from the European Union (EU).
The government said it had taken the decision because it believed the EU competition authorities would reject the state aid as illegal. The country had been seeking EU approval for the grant for the past nine months but has now abandoned the plan.
Irish trade and employment minister Michael Martin said that European representatives had informed him that the EU would launch an investigation into the proposed grant and that it would most likely be judged to contravene competition laws. But he denied that the proposed aid broke EU competition laws.
The exact amount that the Government was planning to offer Intel as an incentive to build the plant has not been disclosed but the Irish media have put the figure at about euro 100 million. The plant – dubbed Fab 24-2 and on which work has already started – is expected to cost euro 1.6 billion.
Ireland has been hugely successful in recent years in wooing high technology companies to its shores. Its low corporation tax level of 12.5%, highly educated workforce and generous state subsidies have proved highly attractive to companies seeking to invest. It was for such reasons that Intel chose Ireland ahead of the US and Israel for the new plant.
But the EU – under pressure from France and Germany – last year imposed tougher rules on state aid with the aim of preventing one country poaching investment from another by offering investors more lucrative incentives. Ireland has now fallen foul of these rules with its proposed grant to Intel.
The EU is thought to have told the Irish government that the financial aid would be rejected because Intel had a dominant market position, the company hadnt considered other European countries and the location of the plant was in an area that already enjoyed high employment and a strong high tech industry. Despite the cancellation of the grant, the Irish government remains confident that Intel will finish building the plant.
