Intel looks for reformation with $20B plan to build new factoriesIntel looks for reformation with $20B plan to build new factories
Intel plans to increase the number of its manufacturing facilities in Arizona from four to six, and to sell its chipmaking capabilities under a new business unit.
March 24, 2021
Intel said it plans to spend roughly $20 billion building two new chipmaking factories in Arizona. The company also said it will sell its chipmaking operations to other companies via a new, separate business called Intel Foundry Services.
The actions come just weeks after Intel veteran Pat Gelsinger took over Intel's CEO position from Bob Swan amid worries that Intel won't be able to recover from a series of major corporate missteps. They also come amid a global chip shortage that has motivated US policy makers to seek domestic chip suppliers.
Overall, investors appeared to cheer Intel's actions. The company's stock rose by around 5% in after-hours trading on its new announcements.
"We are setting a course for a new era of innovation and product leadership at Intel," said Gelsinger in a release. The company's new effort is "an elegant strategy that only Intel can deliver – and it's a winning formula. We will use it to design the best products and manufacture them in the best way possible for every category we compete in."
In terms of chip production, Intel said it plans to construct two new manufacturing facilities (fabs) in Chandler, Arizona, at its Ocotillo campus, raising the number of fabs there from four to six. The plants are scheduled to come online in 2024, and Intel said it expects the investment to generate 3,000 new "high-tech, high-wage jobs," over 3,000 construction jobs, and 15,000 local long-term jobs in Arizona.
"US semiconductor manufacturing has fallen behind other countries," argued Jeff Rittener, Intel's chief government affairs officer, in a post to the company's website. Not surprisingly, Rittener said Intel supports the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, which calls for up to $3 billion in federal grants promoting US chipmaking efforts.
"Those funds are important to level the playing field for US semiconductor companies like Intel that face a 25%-50% cost disadvantage with foreign competitors due largely to the incentives those competitors receive," Rittener wrote.
As the New York Times pointed out, Intel isn't the only chipmaker moving into the Southwest. TSMC previously announced plans for a $12 billion factory in Arizona, while Samsung is eyeing a $17 billion expansion of its facilities in Austin, Texas.
But it's Intel's new "Foundry Services" business unit that represents the biggest revamp of the company's strategy. While some investors and analysts had urged Intel to follow other tech companies like AMD and spin off its chipmaking capabilities, Intel has pivoted in the other direction by expanding its manufacturing operations and selling them to other companies. In doing so, Intel will join the likes of TSMC, GlobalFoundriers, Samsung and others in selling its chipmaking capabilities.
To be clear, AnandTech reported that Intel has already attempted to build a business around foundry services to other companies, with little success. Further, Intel itself also continues to make use of other foundry providers; for example it spends around $7 billion with TSMC every year.
But Intel's Gelsinger said the company's new foundry services operation will be led by semiconductor industry veteran Randhir Thakur, who will report directly to Gelsinger. And it will work with customers to build products using x86, Arm and RISC-V cores.
"What will be key here is the extent of exactly how Intel will offer its x86 designs – it could offer them in a licensing style similar to Arm, allowing customers to go build their own SoCs [system on a chip], or it could be only in a custom design services model, where you tell Intel what you want and they design/manufacture it for you," wrote AnandTech's Ian Cutress. "More details about how this will work is expected to come through the year."
Overall, the new effort by Intel could have a significant impact on its business in the telecom industry. Indeed, Intel now claims a 40% share of the market for general-purpose and customized processors in the radio access network market, where it competes against the likes of Broadcom, HiSilicon, Marvell, Qualcomm and Xilinx. That figure is double its 2022 target a year ahead of schedule.
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