Intel has decided to abandon its plans for a megafab in Germany and a packaging plant in Poland. This significant move, revealed in a letter to staff by CEO Lip-Bu Tan, comes as part of Intel’s strategy to achieve better financial discipline amidst widespread challenges.

Tan noted, “To move forward, we’ll strategically grow our factory footprint in alignment with customer needs, being careful and disciplined in capital allocation—that’s the hallmark of excellent foundries.”

Additionally, plans to consolidate assembly and testing operations from Costa Rica to larger sites in Malaysia and Vietnam are also in the pipeline. Costa Rica remains an essential site with key engineering teams and corporate functions.

This cancellation is a major hit not just for the immediate local economy, which anticipated significant investments, but also for the EU’s ambition to enhance its semiconductor industry, aiming to significantly boost its market share by 2030.

The European Commission and local governments had pledged substantial financial backing for the project. However, Intel later deemed those funds insufficient and sought additional financing, to which the German government declined.

Further complications arose from the site itself; archaeological excavations uncovered ancient burial mounds, dating back around 6,000 years, which impeded construction. Additional soil issues further complicated matters, leading to a pause in the project last September, announced by then-CEO Pat Gelsinger.

The ongoing strategy under Tan indicates a shift toward cutting-edge technologies in foundry services, yet Intel currently lacks significant customer commitments for these new ventures. This scenario leaves them reliant on third-party foundries, like TSMC, to produce many components for their own chips.