The report over the weekend that Intel told the Government that it needed to up its game if it wanted to secure further investment from the US chip maker is a little incongruous given the company’s many problems.
It seems that last December Intel wrote to Pascal Donohoe – then minister for public expenditure but now Minister for Finance – warning that the State’s competitiveness as a location for foreign direct investment was under threat.
Government affairs chief at Intel Ireland Leonard Hobbs called for “a comprehensive and competitive incentive programme so that Ireland can continue to attract and retain the employment and innovation-intensive semiconductor manufacturing industry, not just for new facilities but also for upgrading existing facilities”.
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Intel does well out of the Republic. According to its most recent US regulatory filing, it realised $384 million (€366 million) of grants and refundable tax credits in 2024 from non-US government sources “substantially all and a majority of which, respectively, related to the expansion of silicon wafer manufacturing facilities in Ireland”.
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Given that the Industrial Development Authority generally hands out about €100 million to €120 million a year in incentives, it is not bad going. But that is not the point at issue. The question is given Intel’s serious problems – marked by its shares down 60 per cent at one stage last year – should we be investing any more money in the company at all?
Intel is in trouble. It missed the artificial intelligence “revolution” which has propelled rivals including chip designer Nvidia into pole position. It has also fallen behind other manufacturers such as Taiwan Semiconductor Manufacturing Co (TMSC) in terms of the race to produce faster chips.
A turnaround plan to address these problems led by chief executive Pat Glesinger – who was ousted in December – has stalled and the break-up of the company into its chip design business and its manufacturing, or foundry, arm is being contemplated.
TMSC is reported to be interested in the US factories and US chip maker Broadcom is looking at its chip design business. All of this, of course, is happening against a background of increasing protectionism in the US and the Trump administration is unlikely to support the break-up and foreign ownership of an American champion like Intel.
[ Ireland must ramp up incentives for computer chip industry, says IntelOpens in new window ]
Given the circumstances, the smart move for this State might be to switch tack and start courting Intel’s rivals who appear to have stolen a march on it? Perhaps the huge resources consumed by Intel’s Leixlip site in terms of electricity and water might deliver a better return if utilised by AI data centres or even housing?
These are questions that are worthy of clear-eyed analysis but at this point it is hard to see how the State has any option but to back Intel; not least because Intel has backed the State.
The company is committed to manufacturing its two latest chips – which it hopes will allow it to close the gap with rivals such as TSMC for chips to power PCs and servers – at its $18 billion Leixlip campus. Some of the production is being transferred from its plant in Arizona.
Whether this happened by accident or design is an interesting question. Given its financial problems and the US political climate, you would wonder whether Intel might not be tempted to onshore production back to the US. There is certainly no shortage of incentives. Intel got about $11.5 billion last year from the Federal and state governments to support chip manufacturing in the US.
This or may not have contributed to the decision to put a €30 billion project to build two chip factories in Saxony-Anhalt near Berlin on ice last September. The German government had committed to €9.9 billion in aid for the projects, which would have created 3,000 jobs. A related project in Poland is also on the long finger.
Buyout firm Apollo Global Management paid €11 billion for 49 per cent of a company called SCIP Ireland, which has the rights to operate Fab 34 in Leixlip and has the rights to the related factory output. Intel has the right to buy the chips and will own and operate Fab 34. It is a complex piece of financial engineering and includes penalty payments if Intel does not complete the project.
The company already expects to pay $775 million in penalties related to a decision to delay construction. The costs of abandoning the project entirely are presumably prohibitively high and so for the moment the State and Intel cling together with much hanging on the success of the new chips being made in Leixlip in the core PCs and severs markets.
Longer term, the fate of the company and its Irish operations is linked to how the artificial intelligence boom plays out and what it means in terms of chips. The recent kerfuffle over China’s DeepSeekAI and its use of older, cheaper and less powerful chips shows that the outcome is far from clear.
