Intel plans to spend $20 billion on two new chip plants in Arizona.

Intel's new chief executive is doubling chip production in the United States and Europe, which may please officials concerned about component shortages and reliance on factories in Asia.

Posted  229 Views updated 6 months ago
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Patrick Gelsinger, who took the top job in February, said Tuesday he plans to spend $20 billion on two new plants near existing ones in Arizona. He also promised that Intel would become the largest chipmaker for other companies, in addition to making the processors it has long developed and sold.

Intel is racing to develop new manufacturing processes that will improve chip performance by putting more tiny transistors on each piece of silicon. Leadership in this expensive miniaturization race has passed to Taiwan Semiconductor Manufacturing Company, or TSMC, and Samsung Electronics, whose foundry services make chips for companies such as Apple, Amazon, Nvidia and Advanced Micro Devices.

Some investors and analysts have pushed Intel to abandon or drop production in favor of outside foundries, an approach taken by most other chip companies to boost profits.

But the pandemic shortage of semiconductors for cars, appliances and other products has highlighted the vital role of chip fabs in supporting many sectors of the economy. And even before the recent concerns, worries about the proximity of Asian foundries to China had already led Congress and various branches of the Trump and Biden administrations to support plans to encourage more domestic chip manufacturing, although funding has yet to be made available.

European officials have also put forward proposals for new fabs to reduce reliance on foreign-made chips.

Intel's strategy recognizes that "the world no longer wants to rely on the ring of fire next to China," said G. Dan Hutcheson, industry analyst at VLSI Research. "It's very promising."

TSMC previously announced plans to build a new plant in Arizona, a project estimated to cost $12 billion and expected to receive federal grants. Samsung is seeking government incentives to expand its $17 billion capacity in Austin, Texas.

Mr. Gelsinger, who joined Intel when he was 18, left the company in 2009 after 30 years. He was CEO of software maker VMware for eight years before Intel's board convinced him to replace Robert Swann, who was ousted from his post in January.

Intel said its new global foundry service will operate from the U.S. and Europe, with new factories expected to be announced next year. It already has plants in Ireland and Israel.

"The industry needs more geographically balanced manufacturing capacity," Mr. Gelsinger said.

While Intel is putting $20 billion up front, it hopes to negotiate with the Biden administration and other governments for incentives to expand production, said Donald Parker, Intel's vice president.

Although it manufactures most of its products, Intel has long used outside foundries to produce less advanced chips. Mr. Gelsinger said the company will expand that strategy to include some flagship microprocessors, the computing engines used in most computers. That will include some chips for PCs and data centers in 2023, he said, and will give Intel more flexibility to meet customer needs.

But manufacturing will remain at the core of Intel's strategy, Mr. Gelsinger said, despite recent technical problems.

He said the upcoming manufacturing process, which was delayed last summer, is undergoing major improvements. Intel will also work with IBM on a new partnership to develop new chip manufacturing technology, he added.

Mr. Gelsinger's plans face skepticism. Aside from recent problems with manufacturing technology, Intel has tried to operate as a foundry for other companies in the past with little success.

But Intel has changed those plans in several ways. For one thing, for the first time it will want to license its technical crown jewels - the so-called x86 design used in most of the world's computers - so that customers can use those computing capabilities in chips they develop for Intel, the company said.


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