Intel puts German fab on hold

Intel is pausing construction of the Magdeburg chip plant and a packaging facility in Poland for about two years. The move follows widespread speculation about the firm’s future after a series of downbeat earnings while investing heavily in a technological comeback and manufacturing capacity expansions. CEO Pat Gelsinger says it’s time to rethink “our capital efficiency.” He’s slowing down “to a more normalized cadence of node development and a more flexible and efficient capital plan.” The company is still moving forward with fab projects in the US.

Following a dramatic Q2 earnings report in August, Intel already announced a 10-billion-dollar cost savings operation, including a workforce reduction of 15 percent, a 20 percent capex reduction and a downsizing of R&D activities. FPGA unit Altera will be spun back out. Per Monday’s announcement, the company’s manufacturing arm, Intel Foundry, will become a full subsidiary.

Gelsinger also had some good news to report: Intel has signed “a multi-year, multi-billion-dollar” deal with Amazon Web Services to manufacture AI and X86 data center chips. This is the type of high-profile customer that the CEO needs to convince critics that his company has a future as a foundry. A recent report that test runs failed to convince Broadcom didn’t help his cause.

In another win, Intel has been awarded 3 billion dollars in funding under the Chips Act to manufacture chips for the US government. Another 20 billion Chips Act dollars in grants and loans, however, have reportedly been put on hold while Intel fails to meet certain criteria.