Intel’s new CEO doubles chip manufacturing in the US and Europe, a surprise bet that government officials worried about component shortages and dependency on factories in Asia may please government officials.
Patrick Gelsinger, who took the top position in February, said Tuesday he plans to spend $ 20 billion on two new factories near existing facilities in Arizona. He also vowed that in addition to making the processors it has long developed and sold, Intel would become a major manufacturer of chips for other companies.
Intel had stumbled in developing new manufacturing processes that improve chip performance by packing more tiny transistors onto each piece of silicon. The lead in this costly miniaturization race had shifted to Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics, whose foundry services manufacture chips for companies such as Apple, Amazon, Nvidia and Advanced Micro Devices.
Some investors and analysts had urged Intel to outsource or stop manufacturing in favor of outside foundries, an approach most other chipmakers are taking to drive profits.
However, a pandemic-induced shortage of semiconductors for automobiles, appliances and other products has underscored the critical role that chip factories play in supporting many industries. And before recent concerns, concerns over Asian foundries’ proximity to China had already led Congress and several branches of the Trump and Biden administrations to support plans to encourage more domestic chip manufacturing, even though funding had not yet been made available.
Officials in Europe have also made proposals for new factories to reduce reliance on chips made abroad.
The Intel strategy recognizes that “the world no longer wants to depend on the ring of fire that is right next to China,” said G. Dan Hutcheson, industry analyst at VLSI Research. “It’s very trend-setting.”
TSMC previously announced plans for a new factory in Arizona, a $ 12 billion project that is expected to receive federal funding. Samsung is seeking government incentives to expand its Austin, Texas facility by $ 17 billion.
Mr. Gelsinger, who first came to Intel at the age of 18, left the company in 2009 after 30 years. He was CEO of software company VMware for eight years before Intel’s board of directors persuaded him to replace Robert Swan, who was fired in January.
Intel said its new global foundry service will be operated from the US and Europe. Further plant expansions are expected to be announced in the next year. It already has plants in Ireland and Israel.
“The industry needs more geographically balanced production capacities,” said Gelsinger.
Intel hopes to negotiate with the Biden administration and other governments to get incentives to expand manufacturing, said Donald Parker, vice president of Intel.
Although Intel manufactures most of its products in-house, Intel has long used outside foundries for some less advanced chips. Mr Gelsinger said the company will add some flagship microprocessors, the calculating machines used in most computers, to that strategy. This will include some chips for PCs and data centers in 2023 and will give Intel more flexibility in meeting customer needs.
However, manufacturing will remain the core of Intel’s strategy despite recent technical problems, Gelsinger said.
He said significant improvements were made in the next production process, which was delayed last summer. Intel will also form a new partnership with IBM to develop new chip manufacturing technologies, he added.
Mr Gelsinger’s plans are met with skepticism. In addition to recent manufacturing technology issues, Intel has historically tried to act as a foundry for other companies with little success.
However, Intel has changed these plans in several ways. For one, it will be ready for the first time to license its technical crown jewels – the so-called x86 designs used in most of the world’s computers – so customers can incorporate that processing power into chips they are developing for the Intel company, said.