He is currently recovering for an indefinite period in his native Brazil.
No details have been given yet, but Ferrari are now expected to give the car to one of their test drivers, Luca Badoer or Marc Gene, now that Schumacher is ruled out.
Schumacher's planned comeback was announced a few days after Massa's crash and caused a huge sensation in the motorsport world.
Ticket sales for the Valencia race soared after the news broke, even though Schumacher's camp always said the return was pending the medical.
Schumacher, who retired from racing in 2006, underwent a thorough fitness regime with doctors in Bad Nauheim, Germany, but said early on that the neck was giving him problems.
He said he was ready for the challenge of returning, but had to realise in the end that a comeback (at this time) was impossible due to the ongoing neck problems.
'I am disappointed to the core. I am awfully sorry for the guys of Ferrari and for all the fans which crossed fingers for me. I can only repeat that I tried everything that was within my power. All I can do now is to keep my fingers crossed for the whole team for the coming races,' said Schumacher.