Intel announces it will 'pause' plans for a manufacturing megafab in Germany due to ongoing money trouble

With plans to trim $10 billion from its budget, Intel is halting plans to build a cutting-edge foundry in the green fields of Magdeburg, Germany for around two years. The facility was originally intended to start construction in 2023, with production beginning in late 2027.

In a note sent to employees and later published, Intel CEO Pat Gelsinger announced the decision: "We will pause our projects in Poland and Germany by approximately two years based on anticipated market demand."

That would see the fab delayed until at least 2030. The construction of the foundry had already been pushed back by various historical mishaps, including landing on a 6,000 year-old neolithic burial site and having the very specific misfortune of too much soft soil. Intel had also been chasing the German government for more money, which was roundly denied.

Rumours that the fab may soon be cancelled altogether have been gathering, though that's often true of almost any minutely delayed construction project. Now we know it's delayed, not canned. That said, restarting construction of a multi-billion euro project—the Magdeburg fab was set to cost €17 billion—will require Intel to be in a better financial position than it is right now. The company recently announced plans to lay off 15,000 employees. Half of which have already been let go, with the other half being informed by mid-October.

Similarly, restarting the Magdeburg project, and the packaging plant in Poland that's also been delayed for two years, will depend on demand picking up for its processors or those produced independently by its foundry services. Intel is also holding off from turning on an expansion of its Malaysian packaging plant until demand picks up.

"Now that we have completed our transition to EUV, it’s time to shift from a period of accelerated investment to a more normalized cadence of node development and a more flexible and efficient capital plan," Gelsinger said in the note.

Intel has been gradually splitting its core business (Intel Product) from its manufacturing arm (Intel Foundry) over the past few years. First, the company opened the doors to allow for chips designed by other companies to be built in its fabs. Then, it split the financial reporting between the two divisions. Today, it's announcing that it will run Intel Foundry as a (claimed) independent subsidiary. 

The leadership team of Intel Foundry will be able to make their own decisions and work independently of Intel Product, though it will still report to Pat Gelsinger.

An immediate glimmer of hope for the foundry team will be that Amazon just signed up to a "multi-year, multi-billion-dollar framework" that includes wafers out of Intel's fabs. Otherwise, it still needs to draw in more clients and improve its offerings to really appeal to customers that might otherwise side with the world's largest foundry, TSMC.

Even Intel in recent years has sided with TSMC for many of its products, including its Alchemist GPUs and, more recently, its Lunar Lake and Arrow Lake processors.

Intel Foundry is putting its hope into 18A, the next process node and its next big technological leap for manufacturing. Meanwhile, Intel is incorporating its mobile, power-efficient chip designs that are taking the fight to Arm and Qualcomm into the desktop with Arrow Lake later this year. If it can turn these around with high yields, good performance, and no more chip-breaking bugs, it might get out of the woods yet. There are just a lot of ifs hanging over its head right now.