Intel postpones construction of semiconductor plants in Poland and Germany for about two years

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Intel has announced the postponement of the construction of two semiconductor plants: one in Magdeburg, Germany, and another near Wroclaw, Poland. The decision was taken in response to lower than expected demand for chips.

Both projects, co-financed by public funds, were to be an important element of the European Union’s strategy to strengthen the European semiconductor sector, making it more resilient and independent.

Importance of the EU Chips Act for investment

The EU Chips Act, in force since September 2023, aims to double Europe’s share of global semiconductor production to 20% by 2030. The €4.2 billion Polish project was to be supported by €1.7 billion from the state budget. By contrast, Intel’s €30 billion investment in Magdeburg was the biggest under the EU’s chip strategy, with a third of it to be covered by German subsidies.

Intel’s official position

We intend to delay our projects in Poland and Germany for approximately two years, depending on market demand forecasts, announced Patrick P. Gelsinger, Intel’s CEO, in a blog post on 16 September.

Despite the difficulties, Intel plans to continue investing in the US, which is also looking to expand its chip production capacity.

Intel’s financial challenges

Intel has encountered financial problems that have affected its ambitious plans. The company is experiencing its third consecutive year of declining sales and its shares have lost around 56% of their value in 2024, making it one of the worst performing companies in the S&P 500 index.

In the second quarter of 2024, the giant reported losses of $1.6 billion. It also announced significant layoffs and a plan for “structural and operational adjustments” that will reduce the company’s expenses by more than $10 billion by 2025.

According to Bloomberg, Intel considered several options to counter the losses before deciding to delay the construction of new facilities in Germany and Poland.

Gelsinger also stressed that “Intel has increased capacity in Europe with investments in a factory in Ireland, which will remain the company’s main hub on the old continent”.

Qualcomm takeover speculation

Following Intel’s announcement on Monday (16 September), the Wall Street Journal reported on Friday (20 September) that Qualcomm is considering a possible takeover of the semiconductor giant. Although a deal is described as “far from certain”, according to anonymous sources, such a deal could spell the end of a company that was once the world’s leading chipmaker. By the evening of the same day, the New York Times confirmed the news, adding that Qualcomm had not yet made an official offer.

If the acquisition goes through – and the deal passes regulatory scrutiny – it would be a major coup for Qualcomm, which is set to return to the desktop processor market in 2024 in response to Microsoft’s AI-enabled PC strategy.

Intel is currently in one of its weakest positions for years. Interestingly, the company has also recently had to partially rely on Taiwan’s TSMC to produce its most advanced chips, according to several sources.