The construction of Intel’s planned chip factory in Magdeburg, a crucial part of Germany’s semiconductor strategy, has been postponed by two years.
Intel’s second quarter of 2024 was disappointing. The chipmaker reported a 1 percent decline in sales compared to the same period last year, with a loss of $0.38 per share. In response to this weak performance, Intel introduced a comprehensive cost-cutting program in early August, which includes reducing its workforce by more than 15 percent. These measures, aimed at improving efficiency and competitiveness, are expected to be completed by the end of 2024.
“Our financial results in the second quarter were disappointing, despite achieving key milestones in product and process technologies. The outlook for the second half of the year is more challenging than expected. We are leveraging our new operating model to take decisive actions that improve operational and capital efficiency, accelerating our IDM 2.0 transformation. These steps, along with the introduction of Intel 18A next year to regain leadership in process technology, will strengthen our market position, improve profitability, and increase shareholder value,” commented Intel CEO Pat Gelsinger on the company’s situation.
There are also growing concerns that Intel has fallen behind in technological progress, particularly due to a lack of specialized AI chips, which has made it difficult to compete with Nvidia.
The announcement of Intel’s cost-cutting measures has raised concerns about the planned construction of the Magdeburg chip factory in Germany. Initially, the project was said to be unaffected, but the company has since confirmed that construction will be delayed by two years.
This is unwelcome news for Saxony-Anhalt, where the factory was expected to create around 3,000 jobs. According to information from SPIEGEL, the state is even preparing for the possibility that the project could be scrapped entirely and is considering marketing the site to other industrial and commercial companies.
Additionally, the German federal government is now tied to providing €9.9 billion in state aid to subsidize the factory’s construction. These subsidies have been heavily criticized from the beginning, as the risks were considered high, and the benefits for domestic research seen as minimal.
In an interview with tagesschau.de, Ifo President Clemens Fuest expressed skepticism about the support.
“The chip industry is very capital-intensive, and demand is cyclical. Manufacturers frequently have to adjust investment plans and reduce jobs. Intel has also been criticized recently for missing important technological developments. Against this backdrop, it is questionable whether Intel in Magdeburg should receive such large subsidies,” Fuest said in August.
The federal subsidies were part of the EU’s broader plan to produce 20 percent of the world’s semiconductors in Europe by 2030. Chancellor Olaf Scholz even referred to semiconductors as the “petroleum of the 21st century.”
In line with the EU’s strategy, the German government has also successfully attracted Taiwanese chipmaker TSMC to Dresden, with production scheduled to begin there at the end of 2027. By doubling domestic production, Europe hopes to catch up with Asia and reduce its dependence on geopolitically sensitive semiconductor supply chains. However, achieving this goal may now face delays.
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