[The Exiled]

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

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.

Izvor: The Register