• Intel has postponed the schedule for its $20 billion chip manufacturing plant in Ohio to late 2026, citing a sluggish chip market and slow government subsidies.
  • Originally planned to start chip manufacturing in 2023, the delay is attributed to adapting to changing schedules in the industry.
  • The project is a crucial part of the US domestic chip industry layout and aligns with the Biden administration’s strategy to reduce reliance on Asian factories.

On February 2nd, Intel delayed the timetable for its $20 billion chip manufacturing plant in Ohio, USA, citing a sluggish chip market and slow subsidies from the US government to promote domestic chip industry development.

According to insiders involved in the project, Intel initially planned to start chip manufacturing next year, and now anticipates the manufacturing facility to be completed by the end of 2026. Following that, Intel needs to install complex and expensive machinery for manufacturing advanced semiconductors, after which chip production will commence.

An Intel spokesperson stated, “In our industry, managing large projects often requires adapting to changing schedules. Our decision is based on factors such as business conditions, market dynamics, and capital management.”

The future of the Ohio project is uncertain

Two years ago, Intel’s goal was to start production in 2025, although Keyvan Esfarjani, the Intel executive in charge of manufacturing, had indicated that the scope and speed of expansion would be “highly dependent” on government aid.

Intel currently has around 800 people working on-site in Columbus, Northeast Ohio, and the company expects this number to climb to several thousand by the end of this year. Intel also anticipates creating 7,000 construction jobs with this project.

The initial two chip factories are part of an integrated facility, and Intel had previously stated that it might invest up to $100 billion in this project.

An Intel spokesperson refused to provide a new target for chip production at the factory but stated that they would continue to push forward with the project. Significant progress has already been made on-site, with over 1.6 million work hours completed, and a substantial amount of concrete poured.

Also read: Intel stock tumbles as chipmaker falls further behind in AI race

The project aims at reducing reliance on Asian factories

Delays in large chip projects are not uncommon, as recently seen with TSMC announcing a delay in the start of production at its $4 billion factory in Arizona due to slow progress in subsidy negotiations with the US government.

Intel’s project in Ohio is a crucial part of the domestic chip industry layout in the US and is integral to the Biden administration’s strategy of reducing reliance on Asian factories and strengthening local production. Chips are increasingly considered a crucial technology for national security. Two years ago, the CHIPS Act was enacted, including $53 billion in domestic industry incentives, especially substantial subsidies for projects like Intel’s.

Although the US government plans to provide billions of dollars in funding to major chip manufacturers like Intel and TSMC, substantial funds have yet to be allocated. Intel’s project in Ohio marks a breakthrough, as the state traditionally lacked large chip factories. In addition to expected federal funds, Ohio has also provided $600 million in subsidies for the project, expecting to create 3,000 new jobs.

However, Intel’s construction on this project began during a period of financial constraints. Following the initial boom in chip sales during the early stages of the COVID-19 pandemic, the market faced an oversupply situation two years ago, leading to a decline in purchases of electronic products. Consequently, Intel had to take measures such as layoffs, dividend cuts, and seeking investment partners to alleviate the high costs of chip factory construction.

Favourable signs for Intel

Recently, there have been some favourable signs for Intel, including a preliminary recovery in personal computer sales and expectations of a resurgence in chip demand due to growth in artificial intelligence. Despite these positive indicators, last week Intel made a pessimistic forecast for its first quarter, citing adverse factors in its programmable chips and autonomous driving businesses, although the company expects these impacts to be temporary.

Despite these challenges, Intel continues to rapidly advance its expansion projects in Oregon, Arizona, and New Mexico. The company opened a new factory in New Mexico last week, part of its $3.5 billion investment plan in the state.