Intel to step up chipmaking with $ 20 billion factories

Intel says it will spend $ 20 billion to build two new semiconductor factories in Arizona, the backbone of an ambitious turnaround strategy that also includes outsourcing whenever needed and launching a new service manufacturing computer chips for other companies.

New CEO Pat Gelsinger’s multi-year strategy demonstrates IntelThe pledge to build the majority of its own chips, ending any discussion it should pull out of manufacturing after falling behind Asian rivals such as Taiwan Semiconductor Manufacturing Company and Samsung.

At the same time, the group is launching Intel Foundry Services to produce chips for other companies, a major change for the Santa Clara, California-based company, whose differentiation is both designer and manufacturer.

Intel shares rose more than 7% in after-hours trading, suggesting investor support for a comprehensive strategy that promised to revitalize chip production in the west, while adopting a new stance that would lead to partnerships and synergies.

The new strategy comes amid a global chip shortage that is wreaking havoc in the automotive industry. “A major challenge is access to manufacturing capacity,” Gelsinger said of the crisis. “Intel is in [a] unique position to be up to the task and meet this growing demand. “

Two new chipmaking fabs Intel is building in Arizona mark milestone just months after activist investor Daniel Loeb’s hedge fund Third Point took $ 1 billion stake in the group technological and suggested to the company consider getting rid of its manufacturing operations.

Production of the new factories is expected to start in 2024. Construction will begin this year, creating 3,000 construction jobs. Once built, they will create at least 3,000 permanent “high-tech, high-paying jobs” and about 15,000 local jobs in the long term, Intel said.

The company called its plan IDM 2.0, an abbreviation for the “integrated device manufacturing” approach in which the company designs and manufactures its chips, when much of the industry is fragmented.

But Intel said it would be more open to what it called “cooperation,” or finding ways to partner with – and outsource to – traditional rivals, including TSMC and the South Korean. Samsung. “Intel’s strategic use of outside foundries is an underestimated fact,” Gelsinger said.

Shares of TSMC and Samsung fell 3.9% and 1.3% respectively during trading in Asia on Wednesday.

Its new foundry department, headed by Randhir Thakur, will build chips in the United States and Europe – a significant development given the concentration of chip manufacturing locations today.

Gelsinger cited figures giving Asia an 80 percent market share for the foundry industry – which he expects to be a $ 100 billion market by 2025. The United States hold a 15 percent share and Europe 5 percent.

Intel said it plans to become “a major supplier of foundry capacity” in the United States and Europe, with additional plans to be announced “within a year.”

Gelsinger mentioned wanting to go to Qualcomm, a chip designer, to say, “Hey, let’s find ways to exploit our technologies in ways that weren’t possible before, and can we become your partner? foundry?”

He added: “We will also sue customers like Apple,” which announced in June a major change far from relying on Intel instead of designing its own chips for Mac products, which are then manufactured by TSMC.

Intel also said its much-delayed next-generation 7-nanometer manufacturing process called Meteor Lake “is progressing well” and will reach a milestone next quarter. “We have righted the ship and the 7nm is on a good course,” said Gelsinger.

Daniel Newman, analyst at Futurum Research, said Intel “is committed to not repeating the mistakes of the past few years with delays and production issues, so any timing commitments from the company should be very specific, because any failed schedule will not be good. received by the market ”.

The chipmaker’s plans were announced in a pre-recorded webinar with a live question-and-answer session that included support from CEOs from Microsoft and IBM.

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