Chip-making giant Intel said on Monday it is delaying plans to build two chip factories in Germany and Poland as the company faces lower-than-expected demand.
The announcement will be a major blow to the governments of Germany and Poland, which have heavily subsidized the projects and tout them as a boost to their national industry.
Intel also said it would pull out of its projects in Malaysia, but said its plans in the US would remain unaffected.
In Germany, construction work on the Intel project was due to start in 2023, but was halted after the war in Ukraine fueled inflation.
German officials and the company had been locked in talks over funding for months, but both sides finally signed a deal in June 2023 that included increased subsidies.
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Germany has increased its subsidy to start the 30 billion euro ($33 billion) factory project to nearly 10 billion euros, about three billion more than originally offered.
“We recently increased capacity in Europe through our plant (or factory) in Ireland, which will remain our leading European hub for the foreseeable future,” said Intel CEO Pat Gelsinger.
“We will stop our projects in Poland and Germany for about two years based on expected market demand,” he added.
In Poland, Intel received $1.8 billion to build a semiconductor factory near Wroclaw.
EU countries are seeking to boost production of semiconductors, used in everything from fighter jets to smartphones, and reduce reliance on Asia after pandemic-induced shortages hit some industries and Russia’s war in Ukraine brought at home the dangers of over-reliance.
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On Monday, Intel also said it would receive up to $3 billion in direct funding from the US government to boost semiconductor manufacturing for the US military.
This is part of efforts to “secure the domestic chip supply chain,” according to a statement from Intel.
The company also said it would work with the Department of Defense to improve the resilience of US technology systems.
Source: AFP