Intel’s Hillsboro Mega-Lab Falls Victim to Budget Cuts

Intel has officially abandoned its plans to build a mega lab in Hillsboro, Oregon. The Oregonian received a statement today saying that the $700M facility will not be built, but the R&D work planned for the center has already started in other venues across the state. Intel’s decision aims to reduce costs and increase efficiency and will contribute significantly to Intel’s $3B savings target for 2023.

Intel Hillsboro Mega Lab renders

(Image credit: Intel)

“We are looking to reduce costs and increase efficiencies through multiple initiatives,” wrote Intel spokesperson Penelope Bruce in a statement received by the Oregonian newspaper. “This includes exploring more cost-effective real estate options to continue our data center R&D work in Oregon that is already in progress.”

This major business decision from Intel comes hot on the heels of the reported cancellation of its IDC21 R&D center in Israel. The underlying reason is the same — cost-cutting — and the underlying problem remains the recent history and pretty gloomy outlook for the semiconductor industry, as cyclical events hit and recessionary forces continue to dominate.

Construction of the mega lab at Hillsboro, Oregon, was supposed to begin this year, and it sounded rather ambitious. The facility was planned as a 200,000-square-foot lab at the company’s Jones Farm campus. Its initial major works would be focused on new technologies for cooler and more efficient data centers. Intel assures that the work will continue within Oregon at some of the existing Intel premises throughout the state.

Intel’s Oregon and Israel cancellations could save a combined sum of $900M, meaning Intel would still need to make over $2B in cuts this year to stay on track and satisfy the bean counters and shareholders.

Other targets for sizable cuts might include some of the flagship European investments due to progress in earnest in the coming months. We have already heard some murmurings about Intel delaying its biggest European investment — the Magdeburg mega fab. However, such chitter-chatter could be a tactic to squeeze improved subsidies from the EU, which is seen to be desperate to be ‘self-sufficient’ in semiconductors, hence the EU Chips Act promoted by the European Commission.

Intel CEO at Davos

Pat Gelsinger talked about supply chain and production challenges, at the WEF in Davos last week (Image credit: WEF at Davos)

It has also been interesting to see Intel’s CEO play something of a political game to help bolster support. Speaking from the WEF in Davos earlier this week, Pat Gelsinger told CNN that while oil reserves defined geopolitics for the last 50 years, semiconductor supply chains will be more important over the next 50. Thus he cannily touted greater investments from nations and trading blocs to lay the foundations of “a geographically balanced, resilient supply chain.” If Gelsinger can successfully appeal to US and European governments to up their CHIPs Act contributions and similar, it could go a long way to solving Intel’s remaining $2B+ in targeted cuts this year.