[News] Intel’s Plant Delay Casts Doubt on German Economy, with Chances of Proceeding Estimated at No More than 50%

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By announcing a two-year delay in its plan to build chip factories worth €30 billion (USD 33 billion) in Magdeburg, Intel seems to find a way to temporarily alleviate its financial burden. However, a report by German media outlet DW News warns that the chances of the US chipmaker eventually moving forward with its Magdeburg plans are “no higher than 50%,” indicating the withdrawal may deal a heavy blow to Germany’s economic outlook.

Citing Alexander Schiersch from the Institute for Economic Research (DIW) in Berlin, the report notes that Intel’s ambitious plans have “fallen short.” Three key challenges for Intel has been highlighted: attracting more customers for its chips, improving its AI strategy, and ensuring that cost-cutting measures are effective.

Given the circumstances, Schiersch estimates the likelihood of Intel fully executing its Magdeburg plans at “no more than 50%,” the report suggests.

The report also states that Intel’s move underscores the failure of Germany’s three-party coalition government to drive new investments, with debates on the allocation of the nearly €10 billion set aside for subsidies reignited.

According to DW News, following Intel’s announcement, Finance Minister Christian Lindner proposed redirecting the unspent funds to address a significant shortfall in the German budget. However, the Greens, part of the coalition government, opposed this idea, advocating instead for the funds to be used for climate initiatives. Chancellor Olaf Scholz of the Social Democrats has yet to take a definitive stance.

According to Intel, the German mega-fab is expected to create 3,000 high-tech jobs. During the construction phase, around 7,000 workers will also be employed in the construction industry. In addition, tens of thousands of additional jobs are expected to be created by suppliers and partners.

The German government has pledged €9.9 billion in state aid in terms of the project, as the investment is seen crucial in reducing Germany’s reliance on Asian semiconductors, particularly for its key automotive industry.

However, Volkswagen, one of the largest automaker in Europe for decades, has also been struggling, warning about potential job cuts and production line closures in Germany for the first time in its 87-year history, which may also prompt Intel’s decision. The weak market demand, particularly for its electric vehicles (EVs), is said to be the main reason for this move.

Read more

• [News] Intel Reportedly Sought Commerce Secretary Raimondo’s Help over U.S. Reliance on TSMC
• [News] Intel to Turn Foundry Unit into Subsidiary, with Projects in Germany and Poland Delayed for 2 Years

(Photo credit: Intel)