Reuters reported that Intel CEO Pat Gelsinger is considering additional damage control steps to present to the publicly traded company’s board in a mid-September meeting.
Intel previously announced it would lay off 15 per cent of its global workforce and suspend its stock dividends program after reporting quarterly losses of $1.6 billion in a July earnings presentation.
Investors’ reaction was swift and brutal, with Intel stock plummeting from a high of $50 per share in January to a dismal $19 in August. Investopedia reported Tuesday that Intel was also at risk of being delisted from the Dow Jones Industrial Average, after a 25-year stint among the collection of prominent US stocks.
One of the biggest projects that Intel was planning was in its foundry division called Ohio One plant. Bloomberg reported he was considering adding a move to pump the brakes on expansion with new fabs of which Ohio One was a huge project.
With multiple government incentives wrapping around Ohio One, Intel’s options for next moves locally could see complicated repercussions.
The New Albany plant recently saw supply “super loads” delivered over the summer. While that indicated Intel’s commitment to finishing “Silicon Heartland,” the company also confirmed it wouldn’t meet a target to be up and running by February 2025. Instead, Intel forecasted a time between 2027 and 2028. In 2022, Intel delayed the groundbreaking of the Ohio plant as it waited for Congress to pass the CHIPS Act and net federal funding for the project.
Ohio One’s German counterpart — which outlets have named as potentially on the chopping block — was the recent recipient of a similar pattern. Volksstimme reported Intel pushed back the start of construction on the Magdeburg plant to May 2025, the second delay since it was supposed to start in early 2023. German officials recently rejected Intel’s request for more money, and existing government funding to 6.8 billion euros hasn’t phased Gelsinger from reportedly considering the plant for cancellation altogether.
It wouldn’t be the first stoppage in 2024. Calcalist reported in June that Intel had halted its plans for a $25 billion semiconductor fabrication plant in Israel. The company sent notices to suppliers in the area that their contracts were cancelled. The country had promised $3.2 billion in incentives for the development.
If Gelsinger were to decide to halt the Ohio One project completely, Intel would be on the hook for not just CHIPS Act funding but millions in incentives from the state as well. Both packages included clawback measures, which would give both levels of government the ability to recover awarded funds. President Joe Biden confirmed in March that Intel had racked up $8.5 billion in CHIPS funding, alongside eligibility for $11 billion in loans.
The Ohio Department of Development’s agreement with Intel included $600 million in grants for Intel to build two manufacturing facilities and have them operational with 3,000 employees by the end of 2028. Beginning in March 2024, Intel was required to provide detailed accounting of how it spent the grant money and annual performance reports.
The parties agreed that Ohio could stop payments to Intel and claw back what it had already given if the company had not held up its bargain. However, another $691 million was earmarked for infrastructure investment, such as a new water reclamation facility for the New Albany plant. This portion would have its clawback mechanism in a separate agreement, leaving structures with a cancelled project standing for nought.
Gelsinger is reportedly considering selling the Intel Foundry altogether, but the idea hasn’t been included in the presentation since Wednesday. Multiple outlets have named Taiwan Semiconductor Manufacturing Co. a possible suitor, though sources haven’t indicated that the company is in talks with Intel.
Gelsinger could also spin off the foundry into a subsidiary of Intel, potentially with its executive structure. The company employed a similar division after it bought antivirus firm McAfee in 2011, later letting it operate with its CEO while Intel jointly owned it with private equity firm TPG. Pooling resources with another company on the foundry could give it additional fuel to burn while the new Ohio fab finishes construction.
Gelsinger broke ground on Ohio One just over two years ago. While the plant is no longer running on the same timeline as back then, the company is still incentivised to finish the job, with billions of dollars on the line for it. Calcalist also shared a promising hint: when Intel halted construction in Israel, the outlet reported several senior officials transferred their jobs to the Ohio factory.
Intel had plenty of openings intended for its New Albany plant in 2022. But the company’s career page no longer listed any jobs earmarked for Ohio. Bechtel, the contractor Intel chose for its first construction phase, still had seven positions listed for hire in the area.
To avoid Ohio's clawback measures, Intel will need to have 3,000 workers on-site at operational fabs by 2028 at minimum. The company already has boots on the ground in New Albany, including factory general manager Jim Evers, who envisioned it as the biggest manufacturing operation in Intel’s fold.