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Intel investing $20 billion in new US chipmaking plants as part of turnaround plan

Until now, the US firm's factories were focused on making chips of its own design for computers, servers and other equipment.
Pat Gelsinger said he hoped Apple would be one of the new division's clients. Apple is in the process of switching away from use of Intel's own x86 chips to its own silicon, which is currently manufactured by Taiwan's TSMC.

Intel CEO Pat Gelsinger has only been on the job for about a month. But the semiconductor giant has been in need of a bold new strategy for some time, and on Tuesday, Gelsinger delivered.Intel unveiled a cocktail of initiatives including a $20 billion investment in two new US chipmaking facilities — aimed at reasserting its position as the undisputed leader of the semiconductor industry, a claim many experts have said the company lost in the past several years.”We are setting a course for a new era of innovation and product leadership at Intel,” Gelsinger said in a statement.

The company’s stock rose more than 6% in after-hours trading Tuesday. Shares of competitor AMD fell more than 2% following the news. Taiwan Semiconductor Manufacturing Company (TSM), the world’s largest contract chipmaker, tumbled more than 3% in Taipei on Wednesday.

Gelsinger took over a company facing a host of challenges, including unprecedented competition from Apple and other former partners and an activist shareholder demanding change.

The new strategy, dubbed “IDM 2.0” because of its transformation of Intel’s integrated device manufacturing model (wherein it both designs and manufactures chips), could help solve many of those problems.To address its manufacturing issues and prevent future delays, Intel plans to expand its use of third-party chipmakers such as TSMC, a tack many of its competitors have taken but that Intel has, up until now, refrained from doing for its most advanced chips.

Starting in 2023, Intel will work with third-party foundries to produce products at “the core of Intel’s computing offerings for both client and data center segments,” the company said in a statement.”This will provide the increased flexibility and scale needed to optimize Intel’s roadmaps for cost, performance, schedule and supply,” it said.In the meantime, Intel said its 7-nanometer technology is “progressing well.”

While Intel plans to expand the outsourcing of some of its chipmaking, Gelsinger on Tuesday reaffirmed the company’s longtime commitment to manufacturing most of its products in-house.The company announced a $20 billion investment to add two new chip manufacturing facilities, called “fabs,” to its Arizona campus, a move that is expected to create “over 3,000 permanent high-tech, high-wage jobs; over 3,000 construction jobs; and approximately 15,000 local long-term jobs.”

Incoming CEO wants Intel to again be the unquestioned leader in other foundry offerings with a combination of leading-edge process technology and packaging, committed capacity in the U.S. and Europe, and a world-class IP portfolio for customers, including x86 cores as well as ARM and RISC-V ecosystem IPs,” the company said, adding that the planned offering has “already received strong enthusiasm and statements of support from across the industry.”The new unit could also bring a crucial new revenue stream to the company after it has lost market share in its core PC business in recent years.

Ross Moyo

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