Intel is going through a major restructuring by spinning off its chip manufacturing business into a new independent subsidiary called Intel Foundry. This decision comes after the company experienced significant financial losses, totalling $1.6 billion in the first quarter of 2024. The restructuring, which was announced by CEO Pat Gelsinger, is intended to address the company’s declining stock price. It includes the creation of a separate board of directors and financial reporting specifically for Intel Foundry.
As part of its reorganisation, Intel will suspend operations at its manufacturing plants in Poland and Germany for two years, while continuing projects in Arizona, Oregon, New Mexico, and Ohio. The company also plans to sell part of its stake in Altera and reduce its global real estate footprint by about two-thirds to cut operating expenses. Intel has already laid off 15,000 employees as part of its cost-saving measures.
On a positive note, the Biden administration has approved up to $3 billion in funding for Intel to build chips for the US military, which could boost its position in the defence sector. Despite these efforts, Intel faces challenges with its 13th and 14th generation processors and a $7 billion operating loss in 2023. The company is investing in the new 18A chip manufacturing process, but early tests have raised concerns. Intel plans to begin producing chips with this new process for partners like Microsoft and Amazon next year, which will be crucial for its recovery and regaining its semiconductor leadership.
Lenovo has announced plans to begin manufacturing AI servers at its plant in Puducherry, southern India, and has opened an AI-focused research and development lab in Bengaluru. The company intends to produce 50,000 AI rack servers and 2,400 GPU servers annually, designed for machine learning and other resource-intensive tasks.
These servers will not only serve local demand but also be exported, according to Amar Babu, Lenovo’s Asia Pacific president. Although no specific investment or hiring targets were disclosed, Lenovo already manufactures laptops, notebooks, and personal computers at the Puducherry plant.
The demand for AI chips has surged following the rise of generative AI in late 2023, with AI hardware expected to capture 12% of the global AI market by 2027. Lenovo, which now earns nearly half its revenue from non-PC businesses, is joining other tech giants like Apple and Dell in boosting production in India, partly to reduce reliance on China.
India has attracted global companies with manufacturing incentives, although Lenovo’s AI server production is not tied to any such scheme. However, its collaboration with Dixon Technologies on PC and Motorola phone production does benefit from these incentives.
Qualcomm faced another legal setback in the EU as the continent’s second-highest court largely upheld an EU antitrust fine, reducing it slightly to €238.7 million ($265.5 million) from the original €242 million. The fine, imposed by the European Commission in 2019, stemmed from Qualcomm’s practice of selling chipsets below cost between 2009 and 2011—a tactic known as predatory pricing—aimed at driving British competitor Icera, now part of Nvidia, out of the market.
Qualcomm argued that the chipsets in question only accounted for a small fraction (0.7%) of the market, making it unlikely they could have effectively blocked competitors. However, the General Court in Luxembourg dismissed most of the company’s claims, apart from a minor point regarding the fine’s calculation, which led to a slight reduction.
The ruling marks another chapter in Qualcomm’s legal battles with the EU. While the company can appeal on legal grounds to the EU Court of Justice, it has already experienced mixed results in the European courts. In 2021, Qualcomm overturned a separate €997 million fine, which had been levied for paying Apple billions to exclusively use its chips in iPhones and iPads from 2011 to 2016.
For now, the EU’s watchdog continues to pursue antitrust enforcement in the tech sector, with Qualcomm remaining a key target in its efforts to curb anti-competitive behaviour.
Germany remains confident in Intel’s commitment to building semiconductor plants, despite a two-year delay announced by the US chipmaker. Chancellor Olaf Scholz emphasised the importance of Intel’s project, viewing it as a long-term strategy to enhance Germany’s position in the global semiconductor industry. Scholz made these remarks during a visit to Astana, Kazakhstan.
Intel’s CEO, Pat Gelsinger, revealed the construction pause in Magdeburg as part of broader cost-saving measures. Although German officials acknowledged the delay, they remain optimistic about Intel’s future in the country. Economy Minister Robert Habeck stressed the continued importance of semiconductor production for Germany and Europe.
A disagreement emerged within Germany’s coalition government over the unused subsidies intended for Intel. While the finance ministry favours reallocating the funds to balance the budget, the economy ministry is advocating for reinvestment in the semiconductor industry. Economists also proposed using the funds for tax reform or investment incentives to benefit all companies, not just those receiving political attention.
Scholz confirmed that the government would address how to best allocate the unspent subsidies. Many experts agree that focusing on tax reforms could promote broader business growth across Germany’s industries, ensuring long-term economic stability.
Intel has announced a two-year delay in its plans to build mega chip-making factories in Germany and Poland, citing lower demand than expected. Despite significant government subsidies, Intel decided to pause the projects, which had been seen as a boost for both countries’ national industries. The decision comes as a setback after months of negotiations between German officials and the company, which resulted in increased subsidies for the €30 billion project.
In Poland, Intel had planned to establish a semiconductor factory near Wroclaw, supported by $1.8 billion in funding. While European plans have been delayed, Intel confirmed its US projects remain unaffected, with the company receiving $3 billion in direct funding to bolster domestic semiconductor manufacturing for the US military.
Additionally, Intel is scaling back its investments in Malaysia but will continue expanding its capacity in Ireland, which will remain its primary European hub. The delay in these European projects reflects the broader challenges faced by the EU as it aims to increase semiconductor production and reduce reliance on Asian markets.
Intel’s decision comes at a time when European nations are seeking to strengthen their chip manufacturing capabilities after recent supply chain disruptions. As demand for semiconductors remains crucial to industries such as defence and electronics, both Germany and Poland face delays in their plans for industrial growth.
Intel Corporation has been awarded up to $3.5 billion in federal grants to produce advanced semiconductors for the Pentagon under the Secure Enclave program. The initiative aims to develop military-grade chips in several states, including Arizona, and is part of broader efforts to reduce reliance on foreign manufacturers.
The grant follows previous funding announcements for Intel, which is set to receive as much as $8.5 billion in grants and $11 billion in loans from the Chips and Science Act. This new program highlights the government’s trust in Intel despite its recent financial struggles. Intel is still negotiating terms for its broader incentive package, including facilities in Ohio, New Mexico, and Oregon.
The Pentagon’s decision to choose Intel reflects limited options, as it is the only US manufacturer of advanced processors. Other semiconductor makers, such as Taiwan Semiconductor Manufacturing Co. and Samsung, have also received US support to build facilities, but they remain foreign-based companies.
While the specific chip models to be produced for the Pentagon are unknown, the Secure Enclave program marks a significant commitment by the US government to bolster its semiconductor industry. Intel continues to seek further contracts and has invited other tech companies to explore using its chip facilities.
The European Commission has approved Poland’s plan to provide Intel with more than 7.4 billion zlotys ($1.91 billion) in state aid to support the development of a new chip assembly and testing plant. This significant investment aligns with the EU’s Chips Act, which aims to increase Europe’s share of the global chip market to 20% by 2030. Intel intends to invest up to $4.6 billion in the facility near Wroclaw, Poland, and it is expected to boost economic growth and technological advancement in the region.
Poland’s Deputy Prime Minister Krzysztof Gawkowski confirmed that the aid package would span 2024-2026, while additional legislation is required before finalising the deal. The government expects the process to be completed by the end of this year, enabling construction to begin soon after. This investment represents the largest of its kind in Poland in decades, promising to strengthen its economy and technological sector.
Meanwhile, Intel is also pursuing a $33 billion chip manufacturing project in Germany, but this venture has faced delays. Despite Intel’s ongoing cost-cutting efforts, Polish officials remain confident that their country’s investment plans with Intel will proceed as scheduled. This partnership is seen as a critical step toward securing Poland’s role in the global semiconductor supply chain and attracting further high-tech investments.
The US government is reportedly considering allowing Nvidia to export advanced AI chips to Saudi Arabia. These chips would assist the kingdom in developing and operating cutting-edge models. The move could play a crucial role in Saudi Arabia’s AI strategy, which was a key focus at the recent GAIN summit.
Efforts are underway in Saudi Arabia to meet US security requirements, which could expedite the acquisition of Nvidia’s H200 chips. These chips are expected to boost Saudi Arabia’s capabilities, as they are also used in advanced platforms like OpenAI’s GPT-4. Saudi officials have expressed their intention to comply with US regulations.
The Biden administration had imposed restrictions on AI chip exports, particularly targeting China, but also extending to the UAE and other Middle Eastern countries. However, Saudi Arabia has been careful to manage its relationship with both the US and China, ensuring access to key technologies remains open.
Nvidia and the US Department of Commerce declined to comment on the potential chip sales. The Department of Commerce noted that export control decisions involve multiple government departments, including Defense, State, and Energy.
A significant $1 billion investment has been announced by NXP Semiconductors in India, aimed at doubling its research and development efforts. The company is betting on India’s growing importance in the semiconductor industry, aiming to strengthen its presence in the market.
CEO Kurt Sievers confirmed the plan during the Semicon India conference near New Delhi. The company is already in talks with key industries, including the automotive sector, and operates four design centres in India employing about 3,000 people.
Global giants like Nvidia and AMD have also increased their investments in India, reflecting the country’s growing role in reducing reliance on semiconductor hubs like China and Taiwan. India is also preparing an 85,000-strong workforce to support its ambitions.
The Dutch government announced on Tuesday that ASML will now require a licence to supply spare parts and software updates for chipmaking equipment previously sold to Chinese customers. This applies to equipment that has since been classified under new export restrictions.
The move follows the government’s decision last Friday to add two additional chipmaking tools to its national control list, aligning its policies with the United States. The restrictions aim to curb the export of advanced technology to China.
ASML, a major supplier of semiconductor manufacturing equipment, has previously expressed concerns over the potential impact of such restrictions on its business. However, the company must now comply with the new rules for sales to Chinese clients.
The Netherlands Foreign Ministry confirmed the updated regulations, stating that the licences will help control the flow of sensitive technology in line with international agreements.
