Intel announced Tuesday that it will spend $ 20 billion to build two new chip factories, called fabs, in Ocotillo, Arizona.
The announcement, which coincides with new CEO Pat Gelsinger’s first public comments since taking office, indicates that Intel will continue to focus on manufacturing during industry changes that have led competitors to increasingly separate chip design. and chip manufacturing.
The news comes during a global chip shortage that is hitting industries from automotive to electronics and he fears the United States is lagging behind in semiconductor manufacturing.
“Intel is and will continue to be a leading developer of process technology, a major semiconductor manufacturer and the world’s leading supplier of silicon,” said Gelsinger.
Intel shares rose more than 5% in extended trading on Tuesday.
Intel also said it will start acting as a “foundry” or manufacturing partner for other chip companies that focus on semiconductor design but need a company to make the chips. Intel said its foundry subsidiary will be called Intel Foundry Services and will be led by Randhir Thakur, a current Intel Senior Vice President.
Gelsinger said the foundry business will compete in a market with a potential value of $ 100 billion by 2025. A slide shown by Intel suggested that companies such as Amazon, Google, Microsoft and Qualcomm could be customers of the business. Microsoft CEO Satya Nadella appeared at Gelsinger’s talk in a show of support for Intel’s move.
Intel’s commitment to manufacturing has national security implications. Intel said it will partner with IBM to improve chip logic and packaging technologies, which “will enhance the competitiveness of the US semiconductor industry and support key US government initiatives.”
Intel currently operates four factories, called “wafer factories,” in the United States. In addition to its expanding Arizona site, it also has factories in Massachusetts, New Mexico and Oregon. It also makes chips in Ireland, Israel and has a single factory in China.
The Intel foundry will offer a US and European-based alternative to Asian chip factories.
In February, President Joe Biden said that domestic semiconductor manufacturing is a priority for his administration. His administration hopes to fix the chip shortage and address legislators’ concerns that outsourcing chip manufacturing has made the United States more vulnerable to supply chain disruptions.
In an executive action, Biden initiated a 100-day review that could boost US chip companies with additional government support and new policies.
“Today’s Executive Order, combined with full funding for the CHIPS Act, can help level the playing field in the global competition for leadership in semiconductor manufacturing, allowing American companies to compete on an equal footing. with foreign companies heavily subsidized by their governments, “Intel said at the time in response to the executive order.
Gelsinger took over Intel on February 15 in place of former CEO Bob Swan. Although he was most recently the CEO of VMWare, he began his career at Intel and his appointment has been viewed as a homecoming.
He took over a company facing a variety of challenges. Intel had lost its edge in semiconductor manufacturing over its Asian-based rivals, notably TSMC. Intel’s most advanced chips use a 14- or 10-nanometer process. Intel designs the chips and then manufactures them in its own factories, called fabs.
But competitors, including Intel’s customers like Apple and rivals like AMD, simply design the processor and then manufacture it in a third-party chip factory. These chipmakers, like TSMC and Samsung, use a more advanced 5-nanometer process, which is superior because more transistors can fit on a chip of the same size, increasing power and efficiency.
Gelsinger said Tuesday that its 7-nanometer chips are on track to hit a milestone in the second quarter and that it plans to make most of its products itself. Still, Intel will increase its use of third-party foundries, including TSMC, Samsung and GlobalFoundries, he said.