Intel postpones $28 billion chip manufacturing project
Intel has announced the postponement of its planned USD 28 billion chip manufacturing project in Ohio until 2030.
The global semiconductor market is going through a transition period, leaving many companies reconsidering their moves. Intel has postponed its Ohio-based manufacturing project until at least 2030, with its new factory in New Albany seeing at least a five-year delay.
Intel’s move comes as the company seeks to restructure and cut many of its capital expenses across its global empire. It’s also made the bold decision to become a contract chip manufacturer for other companies, which has hit its financial stability.
According to Naga Chandrasekaran, Foundry Manufacturing General Manager, “We are taking a prudent approach to ensure we complete the project in a financially responsible manner.”
The move to delay its factory will also impact its second factory in Ohio. Although construction on this second factory will continue, it’s expected that it won’t launch operations until at least 2032.
Intel’s decision comes as the global semiconductor market experiences some harsh realities. Changing market conditions – starting from the chip shortage of 2020-22 – have meant that companies like Intel have had to embark upon a realignment period, with chip manufacturers struggling with reduced consumer spending, more cautious investments, and an oversupply of chips in certain sectors.
The industry's unique cyclical nature has forced Intel and its competitors to reconsider many of its ambitious expansion plans. Intel chose to slow things down and reflect on its next moves.
Intel finds itself facing unique challenges due to its pivot toward the foundry model. Intel Foundry Services (IFS) must time its manufacturing expansion to meet actual market demand. The enforced delays in Ohio have been triggered to avoid falling into the trap of dealing with costly idle capacity.
All of this comes at a time of great instability within the market's geopolitical context. North American and European markets are unveiling a selection of incentives to boost domestic chip production and reduce reliance on leading Asian manufacturers, including China and Taiwan.
Investors may have raised eyebrows regarding Intel’s decision to delay in Ohio, but analysts claim this is a pragmatic assessment of today’s semiconductor market reality. This is also why Intel has frozen additional investment in its Israel production facility.
Further moves from Intel will likely depend on how the market unfolds over the rest of the decade and the geopolitical landscape as East and West continue to clash.
