Intel postpones construction of German chip factory for two years

Intel chief executive, Pat Gelsinger, said on Monday that the company will postpone the construction of a chip factory in Magdeburg, Germany, for at least two years.

According to news agency Deutsche Presse-Agentur (DPA), Intel was planning to build two chip factories in Saxony-Anhalt near Berlin, creating some 3,000 jobs, with a groundbreaking ceremony planned for this year.

"It was an investment estimated at around €30 billion ($33 billion) and last year, the German government promised state aid worth €9.9 billion for the settlement," DPA reported.

However, the plans have now been put on hold as Intel struggles to get on top of losses. The group launched a cost-saving plan earlier this year.

"We must continue acting with urgency to create a more competitive cost structure and deliver the $10 billion in savings target we announced last month," Gelsinger said in a press release and letter to employees.

"We will pause our projects in Poland and Germany by approximately two years based on anticipated market demand," he added.

Production was expected to begin in 2027 or 2028.

Gelsinger also announced on Monday Intel's partnership with Amazon Web Services.

"This includes a co-investment in custom chip designs, and we have announced a multi-year, multi-billion-dollar framework covering product and wafers from Intel.

"Specifically, Intel Foundry will produce an AI fabric chip for AWS on Intel 18A. We will also produce a custom Xeon 6 chip on Intel 3 that builds on our existing partnership, under which Intel produces Xeon Scalable processors for AWS. More broadly, we expect to have deep engagement with AWS on additional designs spanning Intel 18A, Intel 18AP and Intel 14A," he said in the statement.

"This framework reflects the power of our “better together” strategy, anchored on our integrated portfolio across foundry services, infrastructure and x86 products. And with the 5N4Y finish line in sight, we are beginning to see a meaningful uptick in interest from foundry customers. This includes continued momentum in advanced packaging, which remains a meaningful differentiator for Intel Foundry as we have tripled our deal pipeline since the beginning of the year," he added.