Intel’s plans to delay the EU’s largest chip-making facility would dent the bloc’s goal to produce 20% of global semiconductors, experts say

US tech giant Intel is halting construction of two chip manufacturing plants in Germany as it struggles to counter shrinking sales and mounting losses, the company’s CEO Pat Gelsinger announced on Monday.

According to Gelsinger, the project in the city of Magdeburg in Saxony-Anhalt is expected to be delayed by around two years.

The company had planned to build two chip factories in Magdeburg worth over $33 billion, creating some 3,000 jobs as part of a larger investment plan for the EU. Intel had also signed an agreement with the German government for about $11 billion in state subsidies for the project, according to the DPA news agency.

The plans, however, have been put on hold as the US tech giant struggles to reduce losses and launched a cost-saving program earlier this year. Intel also said it is postponing a new factory in neighboring Poland.

“We must continue acting with urgency to create a more competitive cost structure and deliver the $10 billion in savings target we announced last month,” Gelsinger said in a letter to employees.

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The German manufacturing site was due to become the largest chip-making facility supported under the European Union’s Chips Act which was passed last year. Intel’s decision to delay the project could deal a blow to EU plans of producing one-fifth of the world’s semiconductors by 2030.

“Without Intel in Magdeburg, Europe is lacking its flagship project,” Frank Bosenberg, the managing director of German industry group Silicon Saxony, told Bloomberg on Monday. “Neither a European market share of 20% or the desired technological sovereignty through semiconductor production below 10 nanometers seem realistically achievable by 2030,” he added.

The EU aimed to increase its global chip manufacturing share to 20% by the end of the decade, supported by over $44.5 billion in subsidies to attract semiconductor companies and reduce foreign dependency. Intel’s project in Germany was a key component of the strategy.

Following the announcement, German Finance Minister Christian Lindner called for subsidies earmarked for the Intel project to be repurposed to close a $13.3 billion federal budget gap projected for 2025.