Intel Delays $20 Billion Ohio Project, Citing Slow Chip Market

• ebbed
• nascent
• headwind

 

 

Intel Delays $20 Billion Ohio Project, Citing Slow Chip Market

Construction on two factories now slated to be finished in late 2026 as company also waits for government incentives

By  Asa Fitch

 

 

President Biden speaks at the groundbreaking of the new Intel semiconductor manufacturing facility in New Albany, Ohio, in 2022. PHOTO: JOSHUA ROBERTS/REUTERS

Intel INTC 0.65%increase; green up pointing triangle

 is delaying the construction timetable for its $20 billion chip-manufacturing project in Ohio amid market challenges and the slow rollout of U.S. government grant money to grow the domestic industry.

While Intel’s initial timeline had chip-making starting next year, construction on the project’s manufacturing facilities now isn’t expected to be finished until late 2026, according to people involved in the project.

Chip-making could begin after that, once Intel installs the complex and expensive machinery needed to make advanced semiconductors.

Advertisement - Scroll to Continue

 

“Managing large-scale projects especially in our industry often involves adapting to changing timelines,” an Intel spokesman said. “Our decisions are based on business conditions, market dynamics and being responsible stewards of capital.”

Two years ago, Intel had targeted production in 2025, although Keyvan Esfarjani, an Intel executive overseeing its manufacturing operations, said at the time that the scope and pace of the expansion would “depend heavily” on government funding.

There are currently around 800 people working on the site, which is northeast of Columbus, Intel said, and the company expects that figure to climb to several thousand by the end of the year. The company expects the project to create 7,000 construction jobs.

The first two chip factories are part of a complex in which Intel has said it could invest up to $100 billion.

The spokesman declined to give a new target for chip production at the facilities, but said the company remained fully committed to the project. Significant progress has already been made at the site, with more than 1.6 million work hours completed and enough concrete poured to cover a football field with a more than five-yard-tall slab.

Major chip projects sometimes are delayed. 

Taiwan Semiconductor Manufacturing

 Co. recently said it was delaying production at a $40 billion chip plant complex in Arizona as negotiations over U.S. subsidies progress.

Intel’s Ohio project is one of the biggest under way in the country, part of a push by the Biden administration and chip-makers to expand operations in the U.S. and reduce reliance on Asian factories for a technology increasingly seen as crucial to national security. The Chips Act two years ago outlined $53 billion of incentives for the domestic industry, including big grants for projects like Intel’s.

No major grants have been awarded, although the administration is expected to award billions of dollars to Intel, Taiwan Semiconductor Manufacturing Co. and other major chip companies in the coming weeks.

Intel’s Ohio project involves a state that hasn’t traditionally been home to big chip factories. In addition to the anticipated federal funding, Ohio gave Intel $600 million in grants for the project, which is expected to create 3,000 new factory jobs.

For Intel, the beginning of construction on the project has come at a time when money is tight. Chip sales boomed at the outset of Covid, but a chip shortage turned into a glut two years ago as people returned to prepandemic routines and electronics-buying ebbed. Intel has responded by cutting jobs, slashing its dividend and looking for investment partnerships to help offset the high capital costs of chip-plant construction.

Some recent signs suggest the market is turning positive for Intel, including a nascent recovery in personal-computer sales and the promise of renewed chip demand from the growth of artificial intelligence. Last week Intel gave a gloomy forecast for its first quarter, however, citing headwinds from its programmable-chip and self-driving businesses that it expects to be transitory.

Despite those challenges, Intel has moved swiftly ahead in recent years with expansion projects in Oregon, Arizona and New Mexico. The company last week opened a new factory in New Mexico, part of a $3.5 billion investment in its operations there.

Write to Asa Fitch at asa.fitch@wsj.com