The chip giant announced the investments in Magdeburg in 2022; it was originally said that construction of the two plants would begin in 2023 and production would begin in 2027. The project has already been delayed and construction was not expected to begin until next year. According to previous plans, around 30 billion euros should be invested in the production facilities, a third of which should come from German taxpayers.Lindner: Reserve funds for the federal budget. The postponement that has now been announced is likely to trigger a discussion about these subsidies. Finance Minister Christian Lindner wrote on Platform X on Monday: “All funds not required for Intel must be reserved in the federal budget to reduce open financial issues. Anything else would not be a responsible policy.” Economics Minister Robert Habeck said: “We will now discuss together how we can use unused funds sensibly and carefully and use them for the benefit of the country.” The at least temporary investment stop in Magdeburg does not come as a complete surprise. In recent weeks there has been speculation that the project could be delayed or even abandoned entirely. The group, founded in 1968, is in one of the biggest crises in its history; it recently reported declining sales and high losses. At the beginning of August he announced an extensive austerity program that would include cutting 15,000 jobs. The dividend is also to be canceled. “Further drastic steps are necessary,” but CEO Gelsinger has already indicated in the meantime that further drastic steps could be necessary. Last week there was a meeting with the board of directors lasting several days to discuss the future. The result is now that expansion projects outside the home market are being slowed down. In addition to Germany and Poland, there are also said to be cuts in a project in Malaysia. Construction projects in US states such as Arizona and Ohio will continue to be pursued unchanged. However, the project in Ohio has also been significantly delayed. Intel can also count on government support in the USA. The company is expected to receive almost $20 billion in subsidies and loans as part of the “Chips and Science Act”. To announce this state aid, US President Joe Biden personally came to the construction site of a factory in Arizona in March. The subsidies in the USA have not yet flowed. They are tied to the achievement of certain milestones.New structure for Intel FoundryGelsinger wrote in his letter on Monday that he wanted to make Intel “leaner, simpler and more efficient.” “This is Intel’s most significant transformation in more than four decades,” he wrote. In addition to postponing investments, he announced other decisions. The Intel Foundry division, with which the company wants to produce chips on behalf of external customers beyond its own needs, is to become an independent corporate unit. This creates a separation from the rest of the business, which is in the interests of customers and suppliers. In addition, Intel has more flexibility to look for external sources of financing for the division. However, Gelsinger assured the television station “CNBC” that Intel wanted to stick to the deal. The organizational separation could at least alleviate some of the concern for potential customers that Intel is prioritizing its own chips in manufacturing. Gelsinger has made Intel Foundry a central part of his strategy after taking over as CEO in early 2021. He wants to make Intel a competitor to the Taiwanese TSMC group, which produces chips for companies like Nvidia and Advanced Micro Devices (AMD). However, the division has not yet gained too many customers and is making high losses. However, there was a success story on Monday when Intel announced an expansion of its partnership with Amazon Web Services (AWS), the subsidiary of the online retailer Amazon that specializes in cloud computing. Accordingly, Intel will use the next generation of its production technology to produce semiconductors for AWS. Gelsinger described this as a vote of confidence in the new manufacturing process. Intel estimated the value of the agreement with AWS at several billion dollars. Intel also announced on Monday that it had secured an additional $3 billion from the US government from the Chips and Science Act. This is to be done as part of a special program run by the Ministry of Defense. According to Gelsinger, the staff cuts announced in August are progressing quickly. Intel has already achieved more than half of the target of 15,000 jobs that are to be eliminated through early retirement agreements and severance packages. Intel also wants to reduce its real estate portfolio by two thirds. Shares have lost massively in valueIntel has recently lost dramatically in value on the stock market. Since the beginning of the year, the share price has fallen by more than 50 percent. After the announcement of the weak numbers and the layoff program in August alone, there was a 26 percent drop in a single day. The market capitalization has fallen below $90 billion. Competitor Nvidia is currently valued at almost $2.9 trillion, Intel’s long-lost rival Advanced Micro Devices is valued at almost $250 billion. Nvidia and, to a lesser extent, AMD benefit from chip systems that are suitable for applications related to artificial intelligence. Intel is lagging behind in this area, and demand for the company’s common chips has suffered as customers prefer competing AI semiconductors. However, the news on Monday was well received. In after-hours trading, the share price temporarily rose by more than 8 percent.
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