Intel has delayed building a plant in Germany until 2030 with a 50% failure prospect

It took the German government some time to secure €10 billion for Intel Fab 29 near Magdeburg. However, the company is now postponing the project to 2029-2030.

The Intel factory in Magdeburg was set to receive €10 billion from the state Climate and Transformation Fund, with an initial installment of €3.96 billion allocated for 2024. However, Intel has delayed construction due to financial reasons and has gradually halted operations. This funding is likely to return to the federal budget.

The delay jeopardizes Germany's ambitions in the semiconductor sector and raises political questions about the use of the €10 billion in public subsidies. Finance Minister Christian Lindner advocates for reallocating the funds, viewing it as a fiscally sensible response to the current economic pressures. Economy Minister Robert Habeck has resisted this change, as his ministry oversees the fund and aims to support economic growth and climate initiatives.

Intel's delay creates uncertainty about the project's future, including the very continuation of it. Questions arise about whether everything will proceed as planned or if new conditions need to be negotiated. Alexander Shirsh from the German Institute for Economic Research (DIW) stated earlier this year that given Intel's current poor financial situation, the chances of the company returning to the Magdeburg project are no more than 50%.

If Intel decides to proceed, the government may need to establish the subsidy conditions from scratch. If Intel cancels the project, there remains the question of how to utilize the land designated for the factory. This could pose obstacles to existing regional development plans.

Considering the global economic situation, it may become increasingly difficult for Intel and the German government to secure the necessary funding and continue construction of the factory in the coming years. Intel is also facing challenges in the U.S.: slow funding under the CHIPS Act hampers the construction of factories and compels the company to seek alternative sources of investment.

Source: Tom's Hardware