Intel has cancelled plans to build a €30bn microchip plant in Germany, a blow for Europe’s technological plans. The US chipmaking company said that it would postpone construction of a site in Magdeburg for around two years and also a facility in Poland despite receiving billions in state subsidies.
Intel announced the announcement as it unveiled a radical revamp to reverse a stock price decline, fuelled largely by fears that Intel had lost its ability in making cutting-edge chip technology.
Intel’s chief executive Pat Gelsinger announced to investors that the company would separate its manufacturing division from the rest of business. This could signal a future breakup of the firm. Last year, German Chancellor Olaf Scholz agreed to award Intel €10bn as subsidies to to encourage it to build a factory in Magdeburg in the chipmaking center of Saxony.
The plant was built as part of a plan to wean Europe away from semiconductors produced in China and Taiwan. Mr Scholz said the facility would help Germany become “one of the world’s largest semiconductor production locations”.
Intel claims that the plant will create 3,000 permanent positions and 7,000 construction-related jobs during its construction.
The EU announced tens-of-billions in funding for it to double its semiconductor manufacturing share to 20pc. In Germany , the subsidies will be paid only after the plant has been built. This is a controversial move at a time when there are concerns over public spending and economic pressure.
Intel’s decision, to delay the start of construction on this facility that was supposed to take place next year, has already caused a rift among coalition members in Germany.
Christian Lindner of the Free Democratic Party (centre-right) said that the subsidies proposed should be used to fill a hole in Germany’s Budget, while Robert Habeck of the Green Party said that they should be used “for the benefit of the country”.
Mr Gelsinger stated that Intel’s Ireland facility, located on the outskirts Dublin, “will remain our leading European hub for foreseeable future”. The company sold a 49pc share in the plant for $10bn (£8.3bn) to private equity giant Apollo.
Intel, which invented the microprocessor, and was once regarded as the most advanced semiconductor manufacturer in the world, has been falling behind Asian competitors such as Taiwan’s TSMC, and Samsung, in the production of advanced chips in recent years.
The data centre industry is also affected by the fact that tech giants are spending more on Nvidia’s artificial intelligence processors than Intel’s traditional CPUs.
As part of its turnaround efforts, the company has spent tens and tens billions of US dollars. The company’s shares have dropped by 56pc in the past year, and it has recently announced plans to reduce 15,000 jobs, or a sixth, of its workforce. It also suspended its dividend.
Intel shares surged in Monday’s after-hours trade as Mr Gelsinger revealed the Germany delays as well as an agreement with Amazon to manufacture a AI chip
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