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Intel cans luxury R&D center, promises parking lot instead

x86 giant wants to sub [spending], 10 * 1000 * 1000 * 1000

Nearly two years after taking over as CEO, Pat Gelsinger's master plan to reinvent Intel is on uncertain footing as the chipmaker struggles financially and fights for government subsidies it says are necessary to keep its foundry expansion on track.

Now, the company's $200 million development center planned for Haifa, Israel is dead. What was envisioned as a high-tech research and development center with creature comforts like outdoor sports, green areas, pop-up restaurants, and a rooftop health center and spa, has been reduced to little more than a parking lot, according to Israeli business publication Globes.

Intel told The Register the move was about "achieving cost reductions." We have determined we can meet our Haifa employees' needs with our existing offices and as a result, we have decided to stop the build-out of IDC12," an Intel spokesperson said, not mentioning the parking lot. We've asked for clarification.

The project was one of the first announced by Gelsinger after replacing former CEO Bob Swan in early 2021 amid activist investor pressures to correct past missteps.

Within a month of taking over, Gelsinger began making grandiose promises, unveiling his plan for IDM 2.0 and launching Intel Foundry Services (IFS) alongside a $20 billion Arizona foundry expansion that would be the first of many intended to compete directly with Samsung Electronics and TSMC. In the year and a half that followed Gelsinger's vision grew grander. A $20 billion mega fab in Ohio, a $18 billion fab in Germany, and a slew of packaging and research and development centers across Europe.

But as 2022 ended, Intel's fortunes began to dwindle amidst rising interest rates and the specter of a global recession, which saw PC spending — a segment that had propped up Intel's revenues for several quarters — plunge.

Making matters worse for Intel, its grand projects weren't immune to inflationary pressures. Last August, Intel admitted its $20 billion plan to build two leading edge fabs in Arizona would instead cost closer to $30 billion. The revelation came as Intel turned to private equity to offset the extreme capex investments commanded by Gelsinger's foundry vision.

During its Q3 earnings call in October, Intel said it would lay off a "meaningful number" of employees and cut spending by approximately 10 billion annually by 2025. The news came as the company saw revenues plummet 20 percent year over year to $15.3 billion.

And now Intel Israel's Haifa development center is among the first on the chopping block.

The news comes as Intel attempts to quell concerns over its previously announced fab project in Magdeburg, Germany. Intel announced the project in early 2022, but by December the project had been placed on hold.

This week, Intel's chief global pperations officer Keyvan Esfarjani, said the project would resume after it had worked out the final funding details with the German government. Much like Intel's Arizona fabs, Intel blamed the surging cost of energy and raw materials along with declining demand for semiconductors for the delay. Intel now expects the project will cost just shy of $22 billion and hopes to convince the German government to increase their support.

This isn't the first time Intel has played this game. As the debate over the $52 billion CHIPS Act dragged on early last year, Intel postponed the ground breaking of its Ohio mega fab, impressing the need for government support. The bill was eventually passed, but it remains to be seen just how much funding Intel will walk away with. ®

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