"This shows: Germany is a highly attractive location. We play at the forefront of global competition and secure sustainable and qualified jobs and value creation," Economy Minister Robert Habeck said.
The first facility in Magdeburg is expected to enter operation 4-5 years after the European Commission's approval of the subsidy package, Intel said.
About 7,000 construction jobs will be created in the first expansion, plus around 3,000 high-tech jobs at Intel and tens of thousands of jobs across industry, the U.S. chipmaker said.
Intel announced plans last year to build a big chip complex in Germany and facilities in Ireland and France as it seeks to benefit from easier European Commission funding rules and subsidies. The EU is trying to reduce its dependence on U.S. and Asian chips supply.
Gelsinger had told Reuters on Friday that the gap between what Germany had offered in subsidies and what Intel needed was too big but said he expected to reach an agreement, adding that his request was to be cost competitive.
"We lost this industry to Asia, we have to be competitive if we're going to bring it back," he said.
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Reuters