Intel doubles down on chip manufacturing, plans $20 billion for new Arizona sites


By Stephen Nellis

March 23 (Reuters) - Intel Corp INTC.O will greatly expand its advanced chip manufacturing capacity as the new chief executive announced plans to spend as much as $20 billion to build two factories in Arizona and to open up its factories to outside customers.

The move by CEO Pat Gelsinger on Tuesday aims to restore Intel's reputation after technological missteps. The strategy will directly challenge the two other companies in the world that can make the most advanced chips, Taiwan's Semiconductor Manufacturing Co Ltd (TSMC) 2330.TW and Korea's Samsung Electronics Co Ltd 005930.KS.

And it will also aim to tilt a technological balance of power back to 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 tensions with China.

Intel is one of the few remaining semiconductor companies that both designs and manufactures its own chips. Rival chip designers such as Qualcomm Inc QCOM.O and Apple Inc AAPL.O rely on contract manufacturers.

But Intel has struggled with delays in bringing online its newest manufacturing technology, sending its shares plunging last year and prompting activist investors to call for it to outsource a greater deal of its manufacturing.

In an interview with Reuters, Gelsinger said Intel has "fully resolved" its problems with its most recent manufacturing technology and is "all systems go" on chips for 2023. It now plans a massive manufacturing expansion.

That will include spending $20 billion on two new factories at an existing campus in Chandler, Arizona, and then additional future sites in the United States and in Europe, Gelsinger said.

Intel will use those factories to make its own chips but also open them to outside customers in what is called a "foundry" business model in the chip industry. Gelsinger said the new factories will focused on cutting-edge computing chip manufacturing, rather than the older or specialty technologies that some manufacturers such as GlobalFoundries specialize in.

"We are absolutely committed to leading process technology capabilities at scale for the industry, and for our customers," Gelsigner said, adding that Intel has lined up customers for the new factories but could not disclose their names.

The move is a direct challenge to TSMC and Samsung. The two have come to dominate semiconductor manufacturing business, moving its center of gravity from the United States, where much of the technology was once invented, to Asia, where more than two-thirds of advanced chips are now manufactured.

Gelsinger said Intel will aim to change that global balance by embracing the foundry business where it historically has been a minor player. Intel will offer chip customers the ability license out its own technological crown jewels - known as the x86 instruction set architecture - as well as offer to build chips based on technology from Arm Ltd or the emerging open source technology RISC-V, he said.

"We will be picking our next sites within the next year for U.S. and Europe," he said. "We're going to have committed capacity for foundry customers."

But even Intel jumps into competition with TSMC and Samsung, it also plans to become a larger customer of theirs by turning to them to make subcomponents of its chips called "tiles" to make some chips more cost-effectively.

Intel plans to make the compute "tiles" for its "Meteor Lake" and "Granite Rapids" chips at its own factories for 2023 but will also offer PC and data center chips with compute tiles from TSMC, Gelsinger said, without giving more detail on the products with parts from TSMC.

"I'll pick the best process technologies wherever they exist," Gelsinger said. "I leverage internal and external supply chains. I'll have the best cost structure. That combination of supply, products and costs, we think is a killer combination."

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(Reporting by Stephen Nellis in San Francisco; Editing by Lisa Shumaker)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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