Ohio Braces for Economic Hit as Intel Hits Pause on Mega Project

• Intel delays its $20 billion chip manufacturing project in Ohio due to market conditions and slow distribution of U.S. grant funds, with construction now expected to be completed by late 2026.

• The chipmaker's stock experiences a 1.5% decline in extended trading after predicting lower-than-market sales for Q1 2024, attributed to uncertain demand for its chips and increased competition in the data center industry.

• Despite the delay in Ohio, Intel plans to make it the largest-ever private-sector investment in the state's history, generating jobs and aiming for environmental sustainability. Meanwhile, the Chinese chip industry is expected to slow down in 2024 after a surge in expenditure on semiconductor equipment in 2023.

Due to market conditions and the sluggish distribution of U.S. grant funds, Intel is postponing the development of its $20 billion chip manufacturing project in Ohio, according to a Wall Street Journal story published on Thursday.

The original plan was for chip production to begin the following year. According to the research, which included project participants, it is anticipated that the current manufacturing facilities' construction would not be completed until late 2026. The chipmaker's stock last saw a 1.5% decline during extended trading.

The business had earlier this month predicted lower-than-market sales for the first quarter due to uncertain demand for its chips, which are utilized in the conventional server and personal computer industries.

This occurred when demand for conventional server chips, Intel's main data center product, was weakened by a change in expenditure to AI data servers, which were dominated by competitors Nvidia and aspiring AI competitor Advanced Micro Devices.

The Ohio Project

Intel will establish its first new manufacturing facility in Ohio in forty years.

The largest-ever private-sector investment in Ohio history, according to the California-based computer giant, is anticipated to generate 7,000 construction jobs in addition to 3,000 Intel positions during the project's development. The mega-site, which will cover over 1,000 acres in the Columbus suburb of Licking County, is anticipated to start producing chips in 2025 after construction is completed in late 2022.

To "build a pipeline of talent and bolster research programs in the region," Intel promised to invest an extra $100 million on top of its initial commitment of over $20 billion, as said in a statement from the firm.

Additionally, Intel stated that the new factories aim to run entirely on renewable energy and prioritize environmental issues at every stage of construction.

Chip Industry in China to Slow Down in 2024

Chinese chipmakers loaded up on production equipment in 2023, which significantly increased expenditure on semiconductor equipment. However, the tailwind is probably going to fade in the early part of 2024.

Recently, chip-gear stocks have risen as a result of stronger-than-expected third-quarter earnings, which were driven by strong Chinese spending. Chipmakers, including SMIC, a Chinese foundry, have been purchasing equipment to produce DRAM memory chips and mature-node logic.

Domestic chipmaking activities in the U.S. and Europe will help with semiconductor equipment investment, but sales may not reflect this until 2025, according to Li.

Furthermore, according to Li, Taiwan Semiconductor Manufacturing (TSM), the largest contract chipmaker globally, is unlikely to increase expenditure until 2025 as it gets ready to start producing 2-nanometer chips in 2026.