US semiconductor maker | Intel pushes back plans for factories in Germany and Poland by about two years

(New York) U.S. semiconductor maker Intel said Monday it is delaying construction of factories in Germany and Poland by about two years, citing forecasts for demand.

If the project is not cancelled, it will be a slap in the face for Germany, which has promised nearly 10 billion euros (15 billion Canadian dollars) in subsidies to attract the microprocessor giant to Magdeburg (central-eastern Germany).

Construction had not yet started, although Intel had initially announced that work would begin in the first half of 2023. The delay was justified by additional costs linked to inflation.

The German government’s grant represented about a third of the project’s estimated cost of 30 billion euros.

“Funds that Intel does not need should be reserved for dealing with the financial problems of the federal budget,” German Finance Minister Christian Lindner responded in a message posted on X. “Any other option would not be responsible policy.”

As for the Polish site, located in Wroclaw (South-West), Intel had committed to investing up to 4.6 billion dollars there, with the creation of 2,000 direct jobs.

The group justified the freezing of the two sites by its forecasts of changes in demand, without giving further details.

Earlier this year, the American company had already postponed the start of construction of a new research and development center in France and frozen a factory project in Italy.

In the immediate future, the group intends to rely on its Leixlip factory in Europe, in the suburbs of Dublin (Ireland), it said in a press release published on Monday.

This turnaround in Europe contrasts with Intel’s industrial development in the United States, which is being supported by the American government, which released an envelope of 20 billion dollars in subsidies in March to allow the group to increase its production.

U.S. federal officials are counting on using the funds to expand or build factories in Arizona, Ohio, New Mexico and Oregon, which could create up to 30,000 jobs.

The company, for its part, must invest some 100 billion dollars in its home country.

Race for AI

“The time has come to move from a period of accelerated investment to a more normal cadence” and “to a more flexible and efficient investment plan,” said Intel, one of the oldest players in the sector.

The company has invested heavily in recent months in EUV machines (” extreme ultraviolet ») from Dutch ASML, which make it possible to manufacture the most advanced chips.

Intel is thus seeking to catch up in the niche of microprocessors adapted to the development of generative artificial intelligence (AI).

Unlike most of its major competitors, led by Nvidia, the group manufactures a significant proportion of its chips itself.

Chief Executive Pat Gelsinger, who took over Intel in February 2021, has even pushed for the development of a service provider business, which consists of producing semiconductors for other companies.

But this division has accumulated losses in recent months, to the tune of several billion dollars, to the point that the group announced Monday that it would make this so-called foundry activity a separate subsidiary.

According to the company, this initiative could in particular allow other investors to enter the capital of this new subsidiary.

For some analysts, this is a first step before a pure and simple split into an independent company.

The company hasn’t given up on foundry, however, as evidenced by the announcement on Monday of a partnership that will see Intel work with Amazon Web Services (AWS), Amazon’s remote computing division, to design and manufacture a chip dedicated to AI.

Wall Street responded well to Intel’s announcement, with shares up 7.89% in after-hours trading on the New York Stock Exchange.

Intel’s difficulties led it to announce, in early August, a major social plan including the dismissal of 15% of its workforce, or around 18,000 people, to reduce its expenses by 10 billion dollars.

Even before the advent of generative AI, the former flagship of American innovation had already been weakened for several years, accumulating delays in the launch of its new chips.

Also on Monday, Intel unveiled a new contract to supply ultra-secure chips to the US Department of Defense, for an amount that could reach three billion dollars.