According to Tom’s Hardware, citing a report from HardwareLuxx, Intel has postponed  its Magdeburg fab project to 2029-2030, raising concerns in Germany about whether the allocated funding should be returned to the federal budget.

The German government took some time to secure €10 billion in funding for Intel’s Fab 29 project near Magdeburg. However, construction has faced multiple delays due to various challenges, including Intel’s worsening financial situation. These issues have ultimately led to a temporary halt in the project, pushing its completion timeline further into the future.

The report from Tom’s Hardware indicates that Intel has decided to delay the project restart until 2029 or 2030. If the project is indeed halted until then, it would severely impact Germany’s semiconductor industry development plans and raise concerns about the future use of the €10 billion in subsidies initially allocated to Intel, including whether these funds should be reallocated.

The report pointed out that, according to the original plan, Intel was expected to receive the first portion of the €10 billion subsidy in 2024, which was approximately €3.96 billion. However, with the project on hold, these funds are now postponed.

The report highlighted that Germany’s Finance Minister, Christian Lindner, has advocated reallocating the subsidy to meet other economic needs, which could help Germany’s finances amid current economic pressures. However, Vice Chancellor and Minister for Economic Affairs Robert Habeck opposes this approach, arguing that the funding should continue to support long-term economic growth and environmental initiatives.

As for whether Intel can soon restart the project, the report indicated that, citing industry sources, given Intel’s current financial difficulties, the probability of the Magdeburg fab project resuming is now less than 50%, and there is a significant chance that Intel may ultimately abandon the project entirely.

Furthermore, the report pointed out that if Intel decides to proceed with the Magdeburg fab, it may need to renegotiate with the German federal government over subsidy details, while given the global economic environment over the next few years, securing large subsidies may be challenging.

On the other hand, if Intel ultimately abandons the Magdeburg fab project, Germany would also face issues related to land use. The report noted that the initial land development was tailored specifically for this facility, which could make it difficult to repurpose the site efficiently in the short term, potentially hindering local economic development plans.
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(Photo credit: Intel)

Recent reports reveal that German automotive parts supplier ZF Friedrichshafen AG (ZF) plans to withdraw from a 3 billion USD joint project with U.S. chipmaker Wolfspeed to build the world’s largest 8-inch SiC chip manufacturing plant. Industry speculation suggests the reasons behind ZF’s decision are Wolfspeed’s financial struggles, repeated construction delays, and the failure of the European Union to deliver on promised subsidies.

Delays in the Construction of Wolfspeed’s 8-inch SiC Chip Factory

In January 2023, Wolfspeed and ZF announced plans to build the world’s largest and most advanced 8-inch SiC device manufacturing facility in Saarland, Germany. ZF initially intended to invest 185 million USD in the project. The factory was expected to be co-owned by ZF and Wolfspeed, but the success of the project was contingent on the EU’s subsidy commitment, which was expected to cover a quarter of the total investment.

However, in June 2023, Wolfspeed announced a delay in the plant’s construction. A company spokesperson cited the weak electric vehicle markets in both Europe and the U.S. as reasons for reducing capital expenditures. Wolfspeed said it would prioritize increasing production at its New York facility instead. Although the German project has not been canceled entirely, Wolfspeed is still seeking additional financing. The company now expects to start construction in mid-2025, two years later than originally planned.

In October, Wolfspeed announced on its website that it had signed a non-binding preliminary term sheet with the U.S. Department of Commerce. Under the CHIPS and Science Act, the Department of Commerce plans to provide Wolfspeed with up to 750 million USD in funding to support the construction of the John Palmour SiC manufacturing facility in Siler City, North Carolina, and to expand Wolfspeed’s existing plant in Marcy, New York.

Additionally, an investment consortium led by Apollo, The Baupost Group, Fidelity Management & Research Company, and Capital Group has agreed to provide 750 million USD in new financing to Wolfspeed. This funding is expected to alleviate much of the financial pressure currently facing the company.

Delayed EU Chip Act Subsidies?

While the U.S. CHIPS Act subsidies have gradually started to materialize, the EU’s 2020 European Chips Act has faced significant roadblocks in securing funding. According to Reuters, the EU’s subsidy promises attracted several major companies, including Wolfspeed, Intel, TSMC, Infineon, STMicroelectronics, and GlobalFoundries, to announce plans for new plants in Europe. However, very few of these projects have actually broken ground.

In addition to the delays in Wolfspeed’s German plant, Intel has also postponed construction of its plant in Magdeburg, Germany. On September 16, Intel’s CEO informed employees that the chip factory’s construction would be delayed by two years. Over a year ago, Intel secured a 10 billion EUR subsidy commitment from the German government. Intel had initially planned to invest over 30 billion EUR to build two cutting-edge chip factories in Germany, marking the largest foreign investment in the country’s history. However, in August 2023, the German government expressed concerns about Intel’s project in Magdeburg and devised an emergency “Plan B” in case Intel pulls out.

Industry experts suggest that both Wolfspeed and Intel are under significant financial pressure, and the delay in receiving German government subsidies has only exacerbated their operational risks. Among the announced projects, even fewer have received formal EU approval. Infineon, for example, began construction on a 5 billion EUR power chip plant in Dresden in 2023, expecting completion by 2026, though it has not yet received EU funding approval. Similarly, onsemi’s 2 billion USD investment to expand its SiC operations in the Czech Republic is still awaiting EU approval.

(Photo credit: Intel)

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.

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(Photo credit: Intel)

For Intel, there are finally some good news around the corner. According to a report by The Register, the EU has approved USD 1.9 billion in aid for the struggling giant’s plant in Poland, but with the condition that the company does not abandon the project amid its crisis.

The information was announced on Friday by Poland’s Deputy Prime Minister Krzysztof Gawkowski, the report notes, that the European Commission has approved a state aid package of USD 1.9 billion (7.4 billion zlotys) for Intel. Citing Gawkowski’s remarks, the report reveals that the investment, including the aid package and overall costs, amounts to more than USD 6.47 billion (25 billion zlotys).

The announcement follows just over a year after Intel revealed its intention to build a USD 4.6 billion assembly and testing facility near Wroclaw, Poland. According to The Register, this project is expected to complement Intel’s other projects in the region and beyond, including its€30 billion chip fabrication plant in Magdeburg, Germany.

According to Intel’s previous announcement, the investment in Poland will contribute to the Europeans goal of bringing back 20 percent of global semiconductor manufacturing capacity to the region by 2030. The company states that its planned back-end manufacturing investment in an assembly and test facility in Poland, combined with the existing fab or front-end chip manufacturing site in Ireland and the planned chip manufacturing site in Germany, will create an end-to-end leading-edge semiconductor manufacturing value chain in Europe.

A rendering shows the state-of-the-art semiconductor assembly/test facility that Intel announced plans to build in Wrocław, Poland. Announced on June 16, 2023, the site will help to meet demand for assembly and test capacity that Intel anticipates by 2027. (Credit: Intel)

However, it is worth noting that due to delays of subsidy approvals. Intel has already been said to postpone its construction of Fab 29.1 and 29.2 in Magdeburg, as the new timeline now pushes the start of construction to May 2025. As the possibility of putting a halt to the German project could not be ruled out amid the company’s crisis, whether a follow-up plan regarding delaying or canceling the Polish plant comes into spotlight.

The Register notes that Intel had previously stated that the Polish facility would employ around 2,000 workers and would be responsible for processing raw wafers produced by nearby fabs, cutting them into individual chips and chiplets for packaging.

If Intel’s Polish project has been carried out as planned, the semiconductor heavyweight may have to wait until the end of the year to access the funds as a few formalities remain, the report points out. For instance, the Polish government still needs to pass certain legislation and meet requirements set by the European Commission before the deal can be finalized.

Regarding the matter, a spokesperson of Intel said that the company values the Polish government’s ongoing support and partnership as the two parties work together towards the shared goal of a more resilient global semiconductor supply chain, according to The Register.

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• [News] Uncashed Checks of the Struggling Giant: Intel’s Unfulfilled Expansion Plans in a Nutshell

(Photo credit: Intel)

Grappling with a series of operational challenges, Intel has been weighing options to stem losses, with cost reduction being one of its major focus. Under this scenario, the decisions the semiconductor giant has made include slashing 15% of its workforce and the cancellation of its 20A process, which can help avoiding the significant capital expenditures needed to scale the node to full production.

In addition to the aforementioned moves, rumors have been circulating regarding the progress of Intel’s global expansion, hinting that the projects at Germany and Penang might be put on hold. Moreover, though granted with USD 8.5 billion in grants and USD 11 billion in loans under the Chips and Science Act, the company has not yet received any money from the U.S. authority, raising concerns on the feasibility of its ongoing Arizona and Ohio projects.

Here is a roundup of Intel’s major expansion projects which have been reportedly delayed, scaling down, or put on hold recently, as cost considerations may be the primary reason.

Accompanied by construction crews on Oct. 12, 2023, Intel CEO Pat Gelsinger toured the company’s two new fabrication plants being built in Chandler, Arizona. (Credit: Intel)

US: Ohio Delayed for 2 Years, with Mass Production Expected in 2027-28

Intel plans to invest USD 100 billion over the next five years in new fabs and expansions across Arizona, New Mexico, Ohio, and Oregon, creating 10,000 manufacturing jobs and 20,000 construction jobs.

However, according to a previous report by The Register, the construction of Intel’s two fabs in Arizona has progressed more slowly than anticipated. Rising costs for materials and labor, combined with a surge in investments in the state, have resulted in a shortage of workers.

Citing Nikkei, the report notes that the cost of constructing a plant in Arizona is now four to five times higher than in other regions, such as Asia, and several times more than the initial budget Intel had anticipated.

The semiconductor giant’s Fab 52 and Fab 62 in Arizona are previously scheduled to be completed in 2024. However, The Register notes that the schedule may be delayed a bit, as the fabs are likely to begin operations later this year or in early 2025, targeting to manufacture chips using Intel’s next-generation Angstrom-era process technology, including the 18A node.

The 20 billion project in Ohio, on the other hand, may be facing larger obstacles as Intel has delayed the plan due to market downturns and delays in U.S. subsidies.

With an initial plan to begin chip manufacturing in Ohio in 2025, the company has now postponed the pipeline, aiming to complete the two fabs in 2026–2027, with operations expected to commence around 2027–2028.

EMEA: Hard-hit Area as Investments on Hold in Israel, France and Italy

The situation is not too optimistic in Europe, neither. According to a report from global media outlet Volksstimme, the construction of Intel’s Fab 29.1 and Fab 29.2 near Magdeburg, Germany, which may totaling 30 billion euros, has been postponed due to pending approval of EU subsidies and the need to remove and reuse black soil. The date of commencement has been pushed from summer 2024 to May 2025.

It is reported that Intel’s fabs in Germany were originally scheduled to start operations by late 2027 and were expected to employ advanced manufacturing processes, potentially Intel 14A (1.4nm) and Intel 10A (1nm) nodes. However, Intel now estimates that it will take four to five years to build these plants, and production is expected to commence between 2029 and 2030.

In addition, earlier in June, the struggling semiconductor giant also put a halt to the expansion of a major factory project in Israel, which was set to invest an additional USD 15 billion in a new chip plant, according to The Times of Israel.

In December, Intel had announced plans to increase its investment in the chip manufacturing plant in Kiryat Gat, from USD 10 billion to USD 25 billion, in order to secure a USD 3.2 billion grant from the Israeli government. However, it has now suspended the plan, suggesting that “managing large-scale projects, especially in our industry, often involves adapting to changing timelines,” the report states.

It is also worth noting that Intel tends to scale down on its production in the EMEA area, as in June, the company announced the sale of a 49% stake in its plant in Leixlip, Ireland, to Apollo Global Management for USD 11 billion, securing more external funding for usage.

Another report by POLITICO in July also notes that the U.S. semiconductor giant has discreetly suspended several investment plans in Europe after incurring significant losses, dealing a setback to Europe’s push to produce more microchips.

In 2022, Intel announced an initial investment of over €33 billion for R&D and Manufacturing in EU, targeting countries including France, Germany, Ireland, Italy, Poland and Spain. However, the report suggests that the promised investments for France and Italy, valued at billions of euros and potentially creating thousands of jobs, will be put on hold for now.

Asia: New Packaging Project in Malaysia Suspended

The latest of Intel’s moves on halting its global expansion would probably be the cancellation of its new chip packaging and testing project in Penang as part of cost-cutting efforts, while the operations of existing facilities will remain unaffected.

The U.S. chip giant had announced three years ago that it would invest approximately USD 7 billion to build new chip packaging and testing facilities in Malaysia, looking to make the site its largest overseas packaging and testing base. Per a report by Malaysia media outlet The Star, Intel employs around 14,000 people in Malaysia, meaning over 2,000 local employees may face the risk of job loss.

Would the series of emergency measures taken by the struggling giant stem the bleeding? Or would these moves more like a cornered beast fighting out of its way? The only thing for sure now may be that Intel would have a pretty different look after the upcoming board meeting in mid-September.

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