Intel to spend billions to revive chip manufacturing in the US and chase TSMC
- New Intel foundry business will make chips for other companies
- CEO Pat Gelsinger says the company will invest US$20 billion in two new Arizona plants
Intel Corp unveiled an ambitious bid to regain its manufacturing lead by spending billions of dollars on new factories and creating a foundry business that will make chips for other companies. The stock jumped about 5 per cent.
The plan, launched Tuesday by new chief executive officer Pat Gelsinger, is an aggressive move that puts Intel into direct competition with Taiwan Semiconductor Manufacturing Co, the world’s most-advanced chip maker.
Gelsinger will spend an initial US$20 billion on two new plants in Arizona to support Intel’s attempt to break into the foundry business. Intel plans even more factories in the US, Europe and elsewhere, with the CEO pledging that the majority of the company’s chips will be manufactured in-house.
Intel dominated the US$400 billion industry for decades by making the best designs in its own cutting-edge factories. That strategy crumbled in recent years as the company missed deadlines for new production technology, while most other chip makers tapped foundry specialists to make their designs.
Intel’s factories now trail TSMC and Samsung Electronics Co, which make chips for Intel competitors, such as Advanced Micro Devices Inc, and big Intel customers including Amazon.com Inc and Apple Inc.
The plan will give Intel “a unique ability to have leadership products, with the leadership supply chain and leadership cost structure across every portion of our business,” said Gelsinger, who rejoined the company earlier this year. “We are off to the races, we’re going to be at parity and then to move to sustained leadership, over time.”
Gelsinger’s predecessor considered abandoning Intel’s in-house manufacturing entirely and some investors wanted the company to cut costs by outsourcing production. The new plan scraps those approaches and represents an expensive, multi-year recommitment to Intel’s manufacturing heritage.
During a presentation on Tuesday, Intel forecast capital expenditure of as much as US$20 billion in 2021, up from US$14 billion last year. The company also projected revenue this year that missed Wall Street estimates.