Intel was planning to build a $32 billion manufacturer site in Magdeburg, Germany, as well as a plant near the Polish city of Wrocław.
In a message to employees, CEO Pat Gelsinger said the plans will be paused for two years “based on anticipated market demand.”
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Intel faces a tumultuous time, losing ground in the CPU space to AMD while also failing to fully capitalise on the AI market with Nvidia far ahead of the competition.
Gelsinger told staff that the company must “continue acting with urgency” to create a more competitive cost structure to deliver $10 billion worth of savings.
Having announced a series of job cuts in August, Intel has now opted to scale back its European expansion plans, touting recent expansions to its plant in Ireland as helping increase its capacity on the continent.
The scale back of its European plans comes as Intel plans to shift its Foundry business, which manufactures chips for external partners, to become an independent subsidiary.
“A subsidiary structure will unlock important benefits,” Gelsinger suggested. “It provides our external foundry customers and suppliers with clearer separation and independence from the rest of Intel.
“Importantly, it also gives us future flexibility to evaluate independent sources of funding and optimise the capital structure of each business to maximise growth and shareholder value creation.”
There had been suggestions Intel could have sold its foundry unit, which reported a $7 billion operating loss last year.
Instead, Intel is shifting its Foundry, though no leadership changes are to take place, with its executives to continue reporting to Gelsinger.
“A more focused and efficient Intel Foundry will further enhance collaboration with Intel Products,” the CEO told staff. “And our capabilities across design and manufacturing will remain a source of competitive differentiation and strength.”
Despite shelving plans in Europe, Gelsinger said the company would complete construction on a new advanced packaging factory in Malaysia, with no further changes expected to the company’s other manufacturing locations, including the sites in Arizona, Oregon, New Mexico and Ohio it is building with government funding through the CHIPS and Science Act.
“We remain well-positioned to scale up production around the world based on market demand as we grow our foundry business,” Gelsinger said.
ALTERA SALE, ‘All EYES ON INTEL’
Beyond scaling back European plans, Intel’s CEO said the company plans to sell part of its stake in Altera, its programmable logic device manufacturing company.
Intel purchased Altera in 2015 in a deal worth around $16 billion.
However, the company plans to sell its stake, though still wants Altera to go public.
The board was tasked with drawing up a list of potential cost-cutting victims, and the sale of Altera was among them, as reported in early September.
“Collectively, these changes are critical steps forward as we build a leaner, simpler and more efficient Intel,” Gelsinger said. “And they build on the immediate progress we have made since announcing our plan on August 1 to create a more competitive cost structure.”
More cutbacks could be on the way, however, as the CEO told staff: “We still have difficult decisions to make.”
“All eyes will remain on us,” Gelsinger said. “We need to fight for every inch and execute better than ever before. Because that’s the only way to quiet our critics and deliver the results we know we’re capable of achieving.
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