Germany Faces Fresh Setback as Intel Halts Planned Chip Factory

  • Decision will see project delayed for about two years
  • Announcement is latest piece of bad news for Germany’s economy

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By Christoph RauwaldKamil Kowalcze, and Christina Kyriasoglou

September 17, 2024 at 3:07 PM GMT+7

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Intel Corp.’s decision to postpone its planned factory in Germany marks a setback for the government in Berlin and will reignite controversy over where to allocate about €10 billion ($11 billion) in earmarked subsidies.

Intel said it will delay construction by about two years depending on market demand, after the company shocked investors last month with a grim earnings report and announced plans to slash about 15,000 jobs. The German project was meant to be the biggest plant supported under the European Union’s Chips Act.

German Finance Minister Christian Lindner said all funds not required for Intel must now be reserved for the reduction of “open financial questions” in the federal budget. “Anything else would not be responsible politics,“ he said late Monday in a post on X.

Lindner is a key protagonist within the German government who insists the country sticks to its constitutionally enshrined borrowing limits. Officials like Economy Minister Robert Habeck, however, have lobbied to reform or suspend the so-called debt brake to help finance needed investments in technology and crumbling infrastructure.

Intel’s decision adds to a string of recent bad news for Germany. Volkswagen AG, its top automaker, made a shock announcement this month that it wants to end a decades-old labor pact and possibly close domestic factories, citing lagging demand. BMW AG cut its full-year earnings guidance and is wrestling with a large recall over potentially faulty brake systems supplied by Continental AG.

Intel said late Monday that it’s also postponing a new factory in neighboring Poland, but that it remains committed to its US expansion in Arizona, New Mexico, Oregon and Ohio.

— With assistance from Jillian Deutsch