Intel Abandons Plans for Magdeburg Semiconductor Plant, Raises Concerns Over Foundry Future

In a significant shift for the semiconductor industry, Intel has officially scrapped its plans to establish a cutting-edge chip manufacturing facility in Magdeburg, Germany, alongside an anticipated processing plant in Poland. This decision comes after over a year of stagnant construction plans. Concurrently, Intel is slowing down the expansion of its research and production facility located in Ohio, USA, and is planning to close its processing plant in Costa Rica, redistributing its capacities to existing sites in Vietnam and Malaysia.

Intel's CEO, Lip-Bu Tan, revealed these developments during an analyst conference focused on the company's recent financial performance. He outlined a strategy aimed at streamlining the company, indicating that the workforce, which stood at approximately 96,400 employees at the end of June, will be reduced to about 75,000 by the end of the year. This follows substantial layoffs in July, which affected thousands of employees, including numerous engineers and CPU developers.

In a communication to the U.S. Securities and Exchange Commission (SEC), Intel painted a bleak picture for its semiconductor manufacturing division, Intel Foundry. The company emphasized that the 14A process generation, slated for 2027, represents a critical juncture for turning its fortunes around. Previously, Intel had acknowledged that the 18A process had fallen short of expectations in attracting external customers.

The company cautioned that without achieving significant external customer acquisition and meeting pivotal milestones for the Intel 14A process, the economic viability of its development and manufacturing could be jeopardized. In such an event, Intel may halt or cease efforts related to the 14A process and its successor technologies, as well as various expansion projects.

This development implies that if the 14A process does not yield favorable economic results, Intel may have to abandon research and development for new manufacturing processes, while existing processes could continue until at least 2030. Consequently, Intel would likely become reliant on external foundries like TSMC for its processors and other products, leading to a potential dissolution of the Intel Foundry division and a separation between its design and manufacturing operations.