Intel will have to reassess the Republic's attractiveness for future investment, the company said yesterday following the Government's decision to withdraw millions of euro in proposed grant aid, writes Jamie Smyth Technology Reporter.
But the world's biggest computer chip manufacturer said it would complete a €1.6 billion expansion to its Leixlip plant in Co Kildare, which is expected to create 400 jobs.
The threat to future investment by one of the State's most significant companies emerged as the Government said it was withdrawing grant aid from the Fab 24-2 project. It cited "clear indications" from the European Commission that it was preparing to rule that the financial assistance thought to be worth up to €100 million represented illegal state aid.
The Government strongly criticised the position adopted by the commission and warned that other big investment projects could be affected by its tough line on aid.
IDA Ireland will shortly notify the commission of a multimillion euro aid package for a €540 million investment by Centocor Biologics, a subsidiary of Johnson & Johnson. The commission will also have to sanction this before any money can be given.
The commission's negative position on the Intel project clearly angered the Government, which had lobbied intensively on the grants issue.
Minister for Enterprise, Trade and Employment Micheál Martin said the commission was "not living in the real world of global competition". He said the project was not going anywhere else within Europe and would introduce advanced technology to the Republic.
IDA chief executive Seán Dorgan said the commission's position on the grant package ran counter to its own goals of promoting technological innovation contained in the Lisbon agenda.
He warned that a narrow interpretation of state aid rules could hurt Europe's competitiveness.
The commission insisted yesterday that it had made no formal response to the Government on grant aid to Intel. A commission source said the decision to withdraw the aid proposal suggested the Government was not very confident of its case.
Intel is spending €1.6 billion to build an extension to its existing chip manufacturing plants in Leixlip.
The plant would be capable of manufacturing a new generation of microprocessors - which act as the brains of personal computers - using the latest equipment and technology available globally.
It had been offered tens of millions of euro by the Government to help it secure the project against competition from other Intel chip plants worldwide.
An Intel spokeswoman said work on its expansion in Leixlip would continue and should be completed by mid-2006. But she indicated that future projects would have to be reassessed given the decision on state aid. "The grant agreement with the Government was a key factor in our decision to invest in Fab 24-2 and we will have to factor in this decision on aid when considering future investments," she added.
The commission's decision could have major implications for the Republic's industrial policy as the IDA will now be restricted in the grant aid it can offer certain big projects.
Intel has received €218 million in State aid in Ireland since 1989.