Berlin to sign agreement with Intel after chip plant talks

BERLIN/STOCKHOLM, June 19 (Reuters) - The German government and Intel (INTC.O) are expected to ink a deal over the U.S. chipmaker's planned factory in Dresden, capping months of talks over subsidies needed for the project that its CEO said will cost it tens of billions of dollars.

Germany has scheduled the signing of an agreement with Intel for 1245 GMT on Monday and both Chancellor Olaf Scholz and Gelsinger will be present for the ceremony, the chancellery said in a statement.

The agreement comes at a time when the United States and Europe are both trying to lure big industrial players via a mix of state subsidies and favourable legislation, with Berlin concerned about losing appeal as a place to invest.

Intel has reportedly asked for subsidies worth 10 billion euros from Germany, where the cost for energy and labour is high.

Intel CEO Pat Gelsinger told Reuters on Friday that the gap between what Germany had offered and what Intel needed was too big but he expected to reach an agreement.

"We are not asking for handouts, we are asking for competitiveness," Gelsinger said. "Labour costs have gone up substantially, material costs have gone up substantially, so all of a sudden, the cost gap was bigger than we had originally estimated."

Intel declined to comment on the subsidy amount.

Gelsinger talked of "massive investments, tens of billions of dollars".

The German government has not confirmed how much state funding the company is set to receive for the project in the central German city of Magdeburg.

The Handelsblatt business daily reported last week that the U.S. company would get 9.9 billion euros ($10.84 billion), up from a previously promised 6.8 billion.

Scholz's government is investing billions of euros in subsidies to lure tech companies to Germany. This comes at a time of growing alarm over supply chain fragility and dependence on South Korea and Taiwan for chips.

($1 = 0.9150 euros)

Writing by Christoph Steitz; editing by Rachel More, Jason Neely and Sharon Singleton

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