With $ 20 Billion Push, Intel Hopes to Return Chip Manufacturing to the United States | Manufacturing News
Intel Corp says it will dramatically expand its advanced chip manufacturing capacity as the new CEO of the U.S. tech giant announced plans to spend up to $ 20 billion to build two factories in Arizona and open its factories in external customers.
CEO Pat Gelsinger’s announcement on Tuesday aims to restore Intel’s reputation after the manufacturing stumbles that plunged stocks last year. The strategy will directly challenge the other two companies in the world that can manufacture the most advanced chips, Taiwanese company Semiconductor Manufacturing Co Ltd (TSMC) and South Korean company Samsung Electronics Co Ltd.
And it will aim to shift a technological balance of power towards the United States and Europe as government leaders on both continents have become concerned about the risks of a concentration of chipmaking in Taiwan given the tensions. with China.
Intel shares rose 7.5% after the company disclosed its new strategy and financial guidance for 2021. Some investors such as Third Point LLC had previously urged Intel to consider parting with its expensive chip manufacturing operations.
Intel said it expected revenue of $ 72 billion and adjusted earnings per share of $ 4.55, against analysts’ estimates of $ 72.9 billion and $ 4.77 per share, according to data from Refinitiv. The company said it plans to spend $ 19-20 billion on capital spending.
Gelsinger said the forecast for 2021 “reflects the shortage of certain components industry-wide.”
‘All systems go’
Intel is one of the few remaining semiconductor companies to design and manufacture its own chips. Rival chip designers such as Qualcomm Inc and Apple Inc rely on external contract manufacturers.
In an interview with Reuters news agency, Gelsinger said that Intel had “completely solved” its problems with its latest manufacturing technology and “all systems work” on the chips by 2023. It now plans a significant expansion of manufacturing.
This will include spending $ 20 billion on two new factories on an existing campus in Chandler, Arizona, which will create 3,000 permanent jobs. Intel will then work on future sites in the United States and Europe, Gelsinger said.
Intel will use these factories to make its own chips, but will also open them up to outside customers in what is known as a “foundry” business model in the chip industry. Gelsinger said the new factories will focus on manufacturing cutting edge computer chips, rather than older or specialized technologies in which some manufacturers such as GlobalFoundries specialize.
“We are absolutely committed to leading large-scale process technology capabilities for the industry and for our customers,” Gelsinger said, adding that Intel had lined up customers for the new factories but could not release their names.
He said in a webcast Tuesday that Amazon.com Inc, Cisco Systems Inc, Qualcomm Inc and Microsoft Corp are supporting his efforts to offer chip manufacturing services. On a conference call, Gelsinger said Intel “will sue customers like Apple.”
Intel has dominated the $ 400 billion industry for decades, making the best designs in its own cutting edge factories. That strategy collapsed in recent years as the company missed deadlines for new production technology, while most other chipmakers called on foundry specialists to make their designs.
Intel factories now follow TSMC and Samsung Electronics Co., which make chips for Intel’s competitors such as Advanced Micro Devices Inc and large Intel customers including Amazon.com Inc and Apple Inc.
TSMC and Samsung came to dominate the semiconductor manufacturing industry, shifting its center of gravity from the United States, where much of the technology was once invented, to Asia, where more than two-thirds of chips advances are now manufactured.
“Intel’s investment will help preserve U.S. technological innovation and leadership, strengthen U.S. economic and national security, and protect and develop thousands of U.S. high-tech jobs and well paid, ”US Secretary of Commerce Gina Raimondo said in a statement.
Gelsinger said Intel will aim to change the global balance of chip manufacturing by embracing the foundry business where it has always been a minor player. Intel will offer chip customers the ability to license its own technological gems – known as x86 compute cores – and offer to build chips based on technology from Arm Ltd and startup SiFive.
“We will choose our next locations in the next year for the United States and Europe,” he said.
Gelsinger’s plan is a rallying cry for those who want Intel – and the United States – to reaffirm their technological leadership. China is investing hundreds of billions of dollars to develop its own semiconductor industry and there are new calls for the US government to support domestic production.
There is, however, considerable ground to compensate for Intel and the United States. Some analysts doubt the company can catch TSMC soon, or ever. This will require a significant investment. TSMC will spend up to $ 28 billion in 2021. That’s double the amount Intel spent last year.
Intel’s U.S. sites could benefit from a $ 30 billion subsidy package lawmakers hope to bring to the U.S. Senate next month. The bill remains largely unwritten, and Gelsinger said on a conference call that Intel’s plan “does not depend on a dime of government support. This is the right strategy for us in the future ”.
Intel also announced plans for a new research collaboration with IBM focused on computer chips and packaging technology.
But even as Intel competes with TSMC and Samsung, it also plans to become one of its biggest customers by turning to them for subcomponents called “tiles” to make certain chips more cost-effectively.
“I will choose the best process technologies wherever they exist,” said Gelsinger. “I operate internal and external supply chains. I will have the best cost structure. We believe that this combination of supply, product and cost is a killer combination. “
Intel has given few details on exactly how it will use the outside factories, but Moor Insights and Strategy analyst Patrick Moorhead said he expects Intel to use them as “gap fillers for some. best-performing chips ”until Intel can regain a manufacturing lead over its rivals.