EU stop Intel grant aid

ishmael whale

The Examiner have missed the point on this one. The EU are not saying that grants should be concentrated in under-developed areas. According to a Commission spokesman on radio this morning, even if this was a project in a less-developed area they would still be looking at what the grant was aimed at. For the package to be cleared, Ireland would need to show the investments involve genuine innovation or creates a new product market. Intel is basically just a manufacturing plant – so wherever it was located its not going to be regarded as R & D or innovative.
The upshot of this is a wake-up call that we need to do things like invest in improving standards in the third level sector and encouraging domestic innovation, and move away from the concept of giving grants for manufacturing plants.

http://www.examiner.ie/pport/web/opinion/Full_Story/did-sg7VZ9Vl9YMiAsg0aewFBADppk.asp
03/03/05
Intel grant aid - EU attitude on funding a wake-up call
EFFORTS have been abandoned to get the formal approval of the European Commission for grant aid promised for Intel’s €1.6 billion project to develop the next generation of microprocessors in Leixlip, Co Kildare. …….. The European Commission has essentially accepted that grants should be permissible to generate jobs in deprived areas that could not otherwise attract them. ….This should act as a Government wake-up call to place more emphasis on job creation in under-developed areas.

http://europa.eu.int/scadplus/leg/en/lvb/g24215.htm
Member States must notify every case of regional investment aid if the aid proposed is more than the maximum allowable aid (EUR 75 million) that an investment of EUR 100 million may receive according to the scale in the table above. They may not grant such aid if:
• the aid beneficiary accounts for more than 25% of sales of the product concerned before the investment or will do so after the investment;
• the production capacity created by the project accounts for more than 5% of the market, unless the average annual growth rate of that market over the last five years is above the average annual growth rate of the gross domestic product (GDP).
The Member States need not carry out these tests where they can show that the investments involve genuine innovation or create a new product market.

A Dub in Glasgo

ishmael whale wrote:

The upshot of this is a wake-up call that we need to do things like invest in improving standards in the third level sector and encouraging domestic innovation, and move away from the concept of giving grants for manufacturing plants.

Totally agree although the fact that the state subsidy goes against EU rules should not come as any great surprise to people.

mr_angry

Anyone expect to see the words "massive tax break for Intel" come into the headlines in the near future?

thejollyrodger

I totally disagree with the EU judgement. I was quite pissed off. Hopefully the government will find a way around it

MrPudding

thejollyrodger wrote:

I totally disagree with the EU judgement. I was quite pissed off. Hopefully the government will find a way around it

It does seem a bit silly as there doesn't seem to be a competition issue, the only other countries bidding for this plant were outside of Europe.

MrP

OfflerCrocGod

thejollyrodger wrote:

I totally disagree with the EU judgement. I was quite pissed off. Hopefully the government will find a way around it

They are still going ahead with it and it seems as if they will also go ahead with a 65nm plant in Leixlip. This is routine upgrading that ALL Intel plants around the world have on a regular basis, for Intel the cash was only icing on the cake - it wasn't going to make a difference to their decision. They don't need us to pay for their fabs they have plenty of money of their own.

Roisin Dubh

Well I am greatly disappointed by this decision. However, I kind of understand the logic behind it in a roundabout kind of way, i.e. Irish companies would not like to see other EU govts giving unfair state aid to companies to the disadvantage of Irish companies.

Villain

I'd understand this decision if there was a possibility of Intel building an extension to Fab 24 somewhere else in Europe, but seen as FAB 24 is in Ireland I don't think that would have happened!

The Sunday Business Post stated on sunday that this new building was the same size as Fab24 it certainly is not it's less than half the size, its only an extension.

This extension will create approx 400 full time jobs and the during the construction there is hundreds of people being employed. The government will get a lot more than 100 million back in PAYE tax alone over the coming years.

This decision just go's to show the control EU have.

dathi1

The upshot of this is a wake-up call that we need to do things like invest in improving standards in the third level sector and encouraging domestic innovation, and move away from the concept of giving grants for manufacturing plants.

The wake up call is from Brussels telling us how we can run our own economy according to rules which they dictate and to which we sign up to like blind sheep at every super state referendum. BTW Google, Intel, HP and so on aren't just "manufacturing plants".

A Dub in Glasgo

It is what the people wanted though

Villain

A Dub in Glasgo wrote:

It is what the people wanted though

What is??

daveirl

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Villain

Daveirl, the majority of people working in Intel are very highly skilled and edcuated.

It is far from just being a manufacturing plant. BTW as far as I know HP also manufacture ink Cartridge's.

A Dub in Glasgo

irish1 wrote:

What is??

Greater control by the EU

Sand

The wake up call is from Brussels telling us how we can run our own economy according to rules which they dictate and to which we sign up to like blind sheep at every super state referendum.

Would Intel or a host of other multinationals even be here to contribute to the Irish economy without Ireland being part of the EU? Maybe, but its beyond simplistic to dismiss the EU on the basis of a decision going against us.

Villain

A Dub in Glasgo wrote:

Greater control by the EU

Oh right I agree I just meant it showed what kind of control they have.

Sangre

Ireland is in the EU, which means there is freedom of goods, workers, capital and movement within the EU, which is continental Europe and most of the surrounding States.
What does this mean? Once in the EU there are no custom duties, unfair taxes or any protectionist regimes and you can employ skilled people from all over Europe with any hassle.
What does this result in? Multi-national companies setting up here giving us employment. They come to the EU to enter the market, our labour force/grants are why they pick Ireland. They would never, ever come here if it wasn't for our membership of the EU.

You can't blame the EU for everything if it suddenly makes a decision against us, we'd be moaning if it was another country doing it.

daveirl

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Villain

I just don't think this decision is doing anyone any good, except maybe countries outside the EU like the US or Israel who could get further FAB contracts ahead of Ireland.

Villain

daveirl wrote:

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I just didn't agree that they are totally different from HP, BTW I am currently working in Intel for a contractor

daveirl

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leeroybrown

daveirl wrote:

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Exaclty. Having worked for Intel Ireland in Leixlip I can say that almost all of the activites that take place there are either directly or indirectly related to semiconductor manufacturing. There is a small software development unit that do work for external clients located there but otherwise everything is focused on shipping the right amount of wafers at the right time at the right price. Also, while people think that that size of an educated work force must mean R&D and other non-manufacturing activities, it doesn't in Intel.

Raw materials in plus processing, quality control, process management, etc equals manufacturing. It may be one of the most high tech plants on the planet but ultimately it exists to manufacture.

daveirl

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Villain

Of course I just didn't want people who don't know what happens at Intel to think that everyone is in a suit loading wafers into a machine.

Sangre

irish1 wrote:

I just don't think this decision is doing anyone any good, except maybe countries outside the EU like the US or Israel who could get further FAB contracts ahead of Ireland.

Yes and then they wouldn't be in the EU so they'd be paying tax and custom duties and there would be no restriction on discriminatory/protectionist taxes.

They don't come to Ireland for the 'high-skilled' labour, thats just the bonus.

leeroybrown

daveirl wrote:

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Ironically the IFO (Fab 10 + Fab 14) facility is comparatively an even more expensive facility than F24 at 90nm/65mn as it's a full Class-1 cleanroom facility.

A Dub in Glasgo

So if it is highly unlikely that Intel would pull out of Ireland because of the heavy financial commitment they made.... why was the Irish Government prepared to give your money to a comapny that is unlikely to pull out and is making a profit?

daveirl

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Roisin Dubh

dathi1 wrote:

The wake up call is from Brussels telling us how we can run our own economy according to rules which they dictate and to which we sign up to like blind sheep at every super state referendum. BTW Google, Intel, HP and so on aren't just "manufacturing plants".

Hmmmm. Industrial policy is probably a better term for grant-policy than economic policy. For example, we still control our own taxes and still would under the EU Constitution. It is important not to confuse these issues.

I am not really very happy with this decision but it is kindof questionable if it even be described as an "EU decision", considering that the deliberations on it would have gone on another 18 months had the Irish Government not just caved in so soon. Who knows what the final decision by the EU might have been by then.

Villain

leeroybrown wrote:

Ironically the IFO (Fab 10 + Fab 14) facility is comparatively an even more expensive facility than F24 at 90nm/65mn as it's a full Class-1 cleanroom facility.

Keep that nose covered!!

leeroybrown

A Dub in Glasgo wrote:

So if it is highly unlikely that Intel would pull out of Ireland because of the heavy financial commitment they made.... why was the Irish Government prepared to give your money to a comapny that is unlikely to pull out and is making a profit?

Simple, the Fab24-2 extension and Intel Ireland getting the first Intel 65nm fab outside the US was a huge coup. Intel will have a pretty good idea of their production schedules and order allocations for about the next two to three years. So, from when Fab24-2 opens you'll have a minimum of that level of future proofing. The obviously side effects are that Intel will keep the original part of Fab-24 going for just as long and that there is an overwhelming probablility that IFO will be revamped/retrofitted to take newer technologies and hence increased life expectancy.

In short they're not buying 400 new jobs, they're buying increased job security for about 5,500 existing jobs and adding 400 new ones.

Also, that money could just as easily have disappeared to Israel where Intel have Fab's with similar existing infrastructure.

leeroybrown

irish1 wrote:

Keep that nose covered!!

Were you the **** who kept nicking my Dryden???

OfflerCrocGod

irish1 wrote:

This extension will create approx 400 full time jobs and the during the construction there is hundreds of people being employed. The government will get a lot more than 100 million back in PAYE tax alone over the coming years.

As far as the Commision could see this didn't actually create 400 jobs, maybe it was that 400 people were to move from the 90nm line to the 65nm line and this is what is being called the "creation" of 400 jobs. I think it's a good move those millions can go to something more usefull, Intel is not pulling out and we have not lost anything.

ressem

Think they'll try again when Intel are dealing with 45nm nanotech?

The AMD Dresden grant aid last yr suggests that heavy grants are still possible.

http://www.theregister.co.uk/2004/02/06/eu_approves_euro_545m_grants/

But having to get approval from Brussels unless company delivers an innotative new product sounds like a rule ripe for political backstabbing between countries.

Personally think that trainng people in top class manufacturing is as important as the R&D side.

ishmael whale

ressem wrote:

The AMD Dresden grant aid last yr suggests that heavy grants are still possible.

Presumably AMD are not seen as having a dominant market position, another factor in the Commission's decision on Intel.

If we take it right, the Commission decision will only push us in the direction we should go in anyway. Does anyone really see a long term future for Ireland as a location for internationally mobile manufacturing?

http://www.ireland.com/newspaper/front/2005/0304/741504455HM1INTEL.html
“ … The commission has signalled opposition to further grants for Intel as they would cement its dominant position in Europe.”

Boggle

I'm not being picky but the costs involved in manufacturing Integrated Circuits doesn't compare to anything else I've heard out there, and it's so expensive nowadays that many companies are consolidating their facilities or outsourcing it to places like TSMC.

I was in TSMC once - never seen such a busy manuf environment. Thing is, while TSMC is much cheaper (state aid) than buillding in your own fab - if the market picks up then you will be strangled as they allocate each customer only so much production capacity...

dloob

The Irish Times reports that two future FABs which Intel has filed planning permission for may not now be built

http://www.ireland.com/newspaper/front/2005/0304/741504455HM1INTEL.html

You have to wonder what will happen when the current FABs become outdated.
Whats the useful life of an Intel FAB these days?
Don't they need to effectively rebuilt every few years to handle new processes?

dathi1

The commission has signalled opposition to further grants for Intel as they would cement its dominant position in Europe.”

"The commission" ........jezus its getting to the stage where Hitler wanted to be without firing a shot.

dathi1

Would Intel or a host of other multinationals even be here to contribute to the Irish economy without Ireland being part of the EU? Maybe, but its beyond simplistic to dismiss the EU on the basis of a decision going against us.

No problem being part of the EU if it was an EU that doesn't interfere with our decisions on how to run our economy but Irish 1 said..

I just don't think this decision is doing anyone any good, except maybe countries outside the EU like the US or Israel who could get further FAB contracts ahead of Ireland.

"maybe countries outside the EU" hmm........

ishmael whale

dathi1 wrote:

No problem being part of the EU if it was an EU that doesn't interfere with our decisions on how to run our economy.

Being part of the EU means we have to accept that it can interfere with how we run the economy. It's unreasonable to expect that other member states have to throw their markets open to our business without our agreeing to play by common rules.

I think we also need to reflect on why the Commission took a negative attitude to supporting Intel. From their perspective, giving Intel grants when it already has a dominant position in the market makes little sense. They are also probably not too worried about the plant moving outside the EU, any more than we'd be bothered about buying our potatoes from Lidl.

If, however, the government was grant aiding a company aiming to compete with Intel in some market, or if Intel were basing some truly innovative operation in Ireland (and hence within the EU), the Commission would in all likelihood permit the grant to be paid.

All in all, I think we need to look past the knee-jerk reaction of decrying the EU for interfering with our desire to subsidise Intel. There's a wider agenda out there that we need to get behind.

Villain

ishmael whale wrote:

Being part of the EU means we have to accept that it can interfere with how we run the economy. It's unreasonable to expect that other member states have to throw their markets open to our business without our agreeing to play by common rules.

I think we also need to reflect on why the Commission took a negative attitude to supporting Intel. From their perspective, giving Intel grants when it already has a dominant position in the market makes little sense. They are also probably not too worried about the plant moving outside the EU, any more than we'd be bothered about buying our potatoes from Lidl.

If, however, the government was grant aiding a company aiming to compete with Intel in some market, or if Intel were basing some truly innovative operation in Ireland (and hence within the EU), the Commission would in all likelihood permit the grant to be paid.

All in all, I think we need to look past the knee-jerk reaction of decrying the EU for interfering with our desire to subsidise Intel. There's a wider agenda out there that we need to get behind.

Yes but ishmael whale, Intel are still going to dominate the market whether or not the EU allow the Irish government to give them grants. IMO this ruling only encourages Intel to build their new facilities outside of the EU, which is of no benefit to anyone in the EU.

ziggy

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ishmael whale

irish1 wrote:

IMO this ruling only encourages Intel to build their new facilities outside of the EU, which is of no benefit to anyone in the EU.

I take it the EU position is the bigger picture. If Singapore can manufacture a particular product cheaper or better than the EU, then it makes more sense to let them make it and sell them something we can make cheaper and better to them.

Consider how the IDA are actually facilitating Irish companies who want to source their manufacturing in China, on grounds that they are going to lose out in the medium term anyway but if we can keep the marketing and product development here then we’ll be moving up that value chain that everyone keep talking about. We’d do well to catch the drift and invest state funds in third level and in research before we find our national business model no longer holds, and we’re left back where we were twenty years ago.

Villain

ishmael whale wrote:

I take it the EU position is the bigger picture. If Singapore can manufacture a particular product cheaper or better than the EU, then it makes more sense to let them make it and sell them something we can make cheaper and better to them.

Thats a nice idea but a bit hopefull, I personally would prefer to see the EU encourage Intel to expand it's business in the EU.

ishmael whale

I suppose the EU position is that Intel is already in a dominant market position, so encouraging it to expand its business just doesn’t arise. What does arise is either encouraging a competitor to Intel (from an earlier post on this thread it looks like the EU cleared a package for an AMD project in Germany) or providing incentives to Intel to do more than manufacturing.

To be honest, I think we need to start thinking now about what we need to do to confront this reality while we still have money in our pockets. We’ve a bit of a habit of getting too comfortable when things work out. Attracting in Foreign Direct Investment on the grounds that our own private sector is too weak and clueless to make any useful contribution to economic growth is fine. (My picture of indigenous Irish industry is an overweight gombeen with three Centras.) Sitting back and letting the foreign parents do all the marketing and R & D, and assuming that they’ll choose Ireland as a manufacturing base so long as we keep our corporation tax low, is downright dangerous. We need to change.