Intel stock falls amid doubts over new factory in Germany

Key recommendations

• Intel shares fell on concerns about the company’s progress on new semiconductor manufacturing plants in Germany.

• Uncertainties about Intel’s German facilities emerged as chipmaker rival TSMC broke ground on its Dresden manufacturing plant.

• Unlike industry peers whose stocks have been lifted by AI hopes, Intel shares have fallen nearly 60% in 2024.

Intel (INTC) shares fell 6.1% on Thursday following reports that the semiconductor giant’s progress on building two new chip manufacturing facilities in Germany could be stalled.

The company plans to build wafer manufacturing plants in Magdeburg, Germany, at what it calls “Silicon Junction.” In June 2023, Intel announced that it was increasing its investment in the project to about $33 billion after securing a government grant of about $11 billion to support construction.

Intel expected the Magdeburg plants to be online and producing high-performance semiconductors as early as 2027. However, according to media reports this week, the schedule now appears uncertain.

Timing concerns, restructuring plans

Some investors have expressed concern that as Intel targets significant cost cuts, the company may choose not to proceed with plans in Germany.

Intel typically focuses its manufacturing capacity on producing its own chips, but the company has worked to expand its third-party manufacturing services to fuel growth. Given the high costs involved in building manufacturing facilities, it remains to be seen how the capital-intensive expansion of contract manufacturing services will fit into Intel’s restructuring and cost-cutting initiatives, according to wealth.

Skepticism about Intel’s German manufacturing facilities follows news that chipmaker rival Taiwan Semiconductor Manufacturing (TSM) broke ground on its own $11 billion facility in Dresden.

Stock performance

After Thursday’s losses, Intel shares are down about 60% so far in 2024.

Year-to-date losses set Intel stock apart from many peers in the semiconductor industry, which have been boosted by artificial intelligence (AI) expectations. Philadelphia Semiconductor Index (SOX) is up over 20% this year.

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