Intel Pauses European Chip Plants in Latest Cost-Cutting Push

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Key Takeaways

  • Intel is pausing planned chip plants in Germany and Poland to cut costs.
  • Intel partnered with Amazon to develop an AI chip using its advanced 18A process.
  • The company is reducing global real estate and cutting 15,000 jobs as part of its restructuring.

Intel has halted European chip plant projects as it also announces a partnership with Amazon on advanced AI chip development.

These latest steps were revealed by CEO Pat Gelsinger in a message to employees on September 16, outlining the next phase of Intel’s transformation.

In response to weak earnings reported in August, Intel is focusing on streamlining operations and reducing expenses.

Gelsinger announced plans to reduce or exit around two-thirds of Intel’s global real estate portfolio by the end of the year. One of the most significant impacts will be the pause on the €30 billion chip manufacturing plant project in Magdeburg, Germany.

Even as it trims costs, Intel is forging ahead with key partnerships. The company has entered a multi-year agreement with Amazon to develop an AI chip using Intel’s cutting-edge 18A manufacturing process. The collaboration is intended to help Intel secure a foothold in the competitive AI chip market, where it faces stiff competition from industry leaders such as Nvidia and AMD.

In his message, Gelsinger emphasized Intel’s broader restructuring goals, which include a clearer separation between the company’s chip manufacturing business and its product business. This move is expected to increase operational efficiency and enable the manufacturing arm to access independent sources of funding.

As part of its broader efforts to streamline operations, Intel is also reducing its workforce by 15,000 employees, with half of the cuts already in place. Meanwhile, the U.S. government has stepped in with $3 billion in funding to support Intel’s chip production for government defense programs.

Following the announcement, Intel’s stock gained about 8% in after-hours trading, signaling investor confidence in the company’s turnaround plan.