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Contract with Intel? Be alert, there’s a change of course!
A year ago, I wrote an article for our website about stability issues with Intel’s 13th and 14th generation CPU chips. Now I’m turning my attention back to Intel, this time to the business side of the company. In March of this year, CEO Pat Gelsinger was replaced by Lip-Bu Tan.
The new CEO has radically changed course, with everything focused on stopping the bleeding. There are major cuts in the workforce (tens of thousands of jobs are disappearing) and the construction of factories is being halted. Even further work on Intel’s new node 14A production technology is up for debate.
The change in strategy was announced in a press release on July 24, 2025. The release can be read on Intel’s website. Later, in a new release on August 22, 2025, Intel announced that it had reached a historic agreement on a government investment in exchange for a share.
In this article, I will briefly explain the background to the current change of course and outline why this may also be relevant to you.
TSMC
In my previous article, I mentioned that Intel is slowly losing ground in the CPU market to its competitor AMD. Under the leadership of executive and engineer Gelsinger, who took office at the end of 2021, Intel committed to investing heavily in the future in order to continue innovating.
In addition to the CPU market, Intel has also attempted to enter the GPU market in recent years, which is dominated by competitor NVDIA. Unfortunately, the first two product series, Alchemist and Battlemage, were disappointing. The technological gap proved to be significant. Intel currently has a negligible market share for these chips, which are used for AI applications, among other things.
In addition to designing computer chips, Intel is also a manufacturer (known as “foundry work”). Gelsinger’s time as CEO was marked by Covid restrictions, which caused delays in deliveries from China, and by the war in Ukraine.
This made Western governments nervous about the fact that the world’s leading chip manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC, approx. 35% market share), is located in Taiwan. The fear was and is that if a war breaks out between China and Taiwan, a large part of the world’s production capacity would come to a standstill. Under Gelsinger, Intel responded aggressively to this concern about the security of chip supplies with very substantial investments.
Large investments, lagging results
Partly in order to be eligible for various packages of billions in state aid, Intel committed in 2022 to investing €80 billion over 10 years in setting up chip factories in the EU, and at the end of last year, the company promised Biden it would invest $100 billion in the United States of America.
The plan was to build the factories and then produce for both Intel’s own chip design division and for third parties on a contract basis. Unfortunately, the results so far have fallen short of expectations. Intel is struggling to interest other chip designers in producing at its factories.
Due to the disappointing results of both the design and manufacturing divisions, combined with high investments, Intel suffered heavy losses. The manufacturing division, Intel Foundry Services (IFS), was particularly loss-making. Nevertheless, the layoffs and cutbacks are not limited to IFS.
Trump administration intervenes
On August 22, the Department of Commerce under the Trump administration announced that it had reached an agreement with Intel. This agreement included a 9.9% stake in exchange for an investment of $11.1 billion, plus an additional five-year option to acquire another 5% of the shares at a price of $20. Following the announcement of layoffs and the slowdown or cancellation of investment projects, including new factories, it became clear that Intel was unable or unwilling to fulfill the agreements it had signed in November 2024.
This partial nationalization is related to that. Intel threatened not to meet a large number of obligations under the Chips Act in order to obtain billions in subsidies. The penalty, stopping payments and possibly even reclaiming funds, was not attractive to the Trump administration. After all, hitting Intel in this way would cost many more jobs in the short term.
Under the deal, Intel will receive a substantial portion of the promised subsidy, USD 5.7 billion, ahead of schedule. The milestones that Intel must achieve have also been renegotiated (partly waived, partly rescheduled). This gives the new CEO the necessary freedom to change policy.
Impact in the Netherlands and Europe
Although Intel is an American company, the change of course by this giant also has a significant impact on us here in the Netherlands and Europe. Intel has employees in Europe. In addition, factories are under construction in Germany and Poland, which have been announced as being scrapped.
The uncertainty surrounding the further development of process node 14A also has the potential to negatively impact ASML. To date, 14A is the only announced production process that uses ASML’s latest machine, the High Numerical Aperture Extreme Ultra Violet lithography machine.
The High-NA EUV machine has been in development for 10 years, and in 2024 Intel purchased all units produced by ASML. Other chip manufacturers are still investigating the High-NA machines at this time.
America first in practice
The US investment in Intel under Trump is another reason to believe that Intel’s change of course will affect Europe. Trump is known for his America First rhetoric. The billions in state aid will undoubtedly have been provided with the requirement that American jobs be preserved. Such conditions effectively mean that the rest of the world will be the first to be sacrificed. At the end of July, Intel canceled the Mega Fab project in Magdeburg, Germany.
The project would have cost more than EUR 30 billion, created 3,000 direct jobs, and, with EUR 10 billion in subsidies, was the project with the highest amount of state aid in German history. The failure of the project is therefore a serious setback for the German (and thus the European) economy.
Take stock urgently!
Do you do business with Intel or companies that supply Intel? Are you involved, directly or indirectly, in the faltering/canceled projects? Do you work at/for Intel? Then it is high time to take a close look at your contracts. Intel is tightening its belt. Prevent yourself or your company from footing the bill and let us help you explore the options. Because before you know it, it will be too late.
Our expert lawyers will help you get a grip on this rapidly changing situation. With the right knowledge and advice at your disposal, you can make a well-informed decision. Contact us immediately by email or phone ; managing the situation surrounding Intel cannot wait.
