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Intel may delay construction of German mega-fab to cut costs

No longer 'a definitive date' for facility scheduled to be built from next year

Intel is set to delay construction of its planned semiconductor manufacturing plant at Magdeburg in Germany, and is said to be seeking further public subsidies for the project, citing increased costs as one reason for the rethink.

The chip giant had intended to start construction work at the Magdeburg site sometime in the first half of 2023 and for production to start in 2027, but those plans are now said to be on hold, according to German media outlet Volksstimme, which published an interview with Intel spokesperson Benjamin Barteder.

The report has Barteder saying that a lot has changed since the plans were announced earlier this year, with various issues such as inflation driving up the cost of energy and raw materials, plus the falling demand for semiconductors worldwide.

"Geopolitical challenges have become greater, semiconductor demand has declined, and inflation and recession are disrupting the global economy," he is quoted as saying, adding: "This means we cannot yet give a definitive date for the start of construction."

When the plans for a so-called "mega-fab" were disclosed in March, the investment required for building the site was estimated at €17 billion ($18 billion), but Intel now claims the cost has risen to about €20 billion, and the company wants the German government to increase the amount it is offering in subsidies, according to the report.

As The Register reported in early summer, Intel was already due to receive €6.8 billion ($7.2 billion) in subsidies from the German government, covering nearly 40 percent of the then expected cost of construction at the Magdeburg site.

The German government had earlier said that it was willing to offer a total of up to €14 billion ($14.85 billion) in state aid to encourage chipmakers to set up shop in the country.

It isn't clear whether Intel is merely angling for more funding to help cover the increased cost of building its fabrication plant or whether the company is having second thoughts.

If it decides not to proceed, this would be a big blow not just for Germany, but for the wider European Union, which announced plans in February to ramp up European semiconductor design and manufacturing with the European Chips Act. Intel was set to play major part of this.

We asked Intel if it could clarify the situation regarding its plans for the Magdeburg site, and will update this article if we receive a response.

In June, it was widely reported that Intel had threatened to delay construction of two fabrication plants at a site in Ohio because the US government was dragging its heels over approving the US CHIPS Act that authorizes subsidies for it and other chipmakers.

As it turned out, the company had merely postponed a ceremony intended to celebrate the start of the construction, but it did say the scope and pace of its expansion in Ohio would depend heavily on funding from the CHIPS Act being forthcoming.

Meanwhile, The Times of Israel reports that Intel has laid off dozens of employees at its operation in the country, citing financial reasons. It said that other Intel Israel employees were offered retirement packages or unpaid leave, and that this may grow to include thousands of staff.

The move comes just weeks after Intel offered staff in Ireland the opportunity to take three months' unpaid leave from their jobs, all said to be part of a massive cost reduction exercise, with the company said to be aiming to save $3 billion annually from next year and by between $8 billion and $10 billion by 2025.

In other news, Intel announced the 2023 release of its oneAPI developer tools, claimed to bring performance and productivity enhancements, and also add support for new plug-ins that make it easier for developers to write SYCL code for non-Intel GPU architectures.

The updated oneAPI tools also add support for the chip giant's upcoming 4th Gen Xeon Scalable processors, Xeon Max Series and its Datacenter GPUs, including the Flex Series and the new Max Series. ®

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