More money can’t solve all problems for German Intel fab
Things are moving “a little slower than expected,” but Intel is still “100 percent committed” to building a fab in Magdeburg, assured Frans Scheper, general manager for the EMEA region. Intel put the project on hold a year after announcing it, asking for additional subsidies to cover increased energy and construction material costs. The issue is causing a rift in Germany’s ruling coalition.
Energy prices and related cost rises could well prove a tough nut to crack. After peaking last summer, natural gas prices have returned to pre-Ukraine war levels, but that doesn’t mean that the energy crisis is over. Even lower Russian supplies, increased demand in Asia and unfavorable weather could easily reverse the downward pricing trend. European gas futures soared 20 percent in a single June day, tentatively explained as the result of LNG suppliers starting to favor Asia over Europe.
One solution would be to arrange for a dedicated power supply that cuts wholesale electricity prices out of the equation. Reportedly, the state of Saxony-Anhalt is considering exactly that, in lieu of increasing subsidies. Apart from providing energy security, solar and wind parks – a common sight in Germany – would fit well with Intel’s pledge to cut greenhouse gas emissions to zero by 2040. But even with the state removing red tape, that would add years to completing the project.
A lot can happen in the meantime and it wouldn’t be the first time Intel just builds an empty fab shell. The processor maker not only faces the gargantuan task of getting alongside TSMC and Samsung in terms of both technology and cost, but it also needs to convince customers to sign up with a company that has slipped up and that has yet to turn a decades-old corporate culture toward the service-oriented foundry business model. Two early wins, Qualcomm and Tesla, have recently backed off after Intel dropped the ball, the Wall Street Journal reported.
Labor is an issue, too. Even Germany’s mighty manufacturing economy is facing a shortage of scientists and engineers. Many of the country’s skilled workers and technical specialists are now entering retirement, while enrollment in STEM fields has been in decline for years, according to a study from the German federal statistics agency. Plans are in the works to revamp German immigration laws to attract more talent, but Saxony-Anhalt is a stronghold of the anti-immigration party Alternative für Deutschland.
Finally, Intel’s fab might become irrelevant once TSMC throws its hat in the ring. Realistically, Europe’s automotive industry is the only European sector that will require high volumes of sub-10nm semiconductor technology in the foreseeable future. The Taiwanese foundry has hinted its Dresden plant, currently under consideration, would start producing 20-ish-nanometer nodes, but EENews Europe convincingly argues that it might move on to 6nm MCUs and even 3nm AI chips for self-driving cars. If Intel can’t snatch these customers, what’s the point of a European fab?
It would be foolish to write off a formidable company like Intel, which has successfully reinvented itself in the past. Nonetheless, it’s clear that even with generous subsidies, the Magdeburg facility faces an enormous uphill struggle.
Main image credit: Intel
