(Image: Intel)In 2021 Intel CEO Pat Gelsinger spent a lot of time talking to the press about the company’s plans to rejuvenate its engineering reputation, and about the company’s five year plan to regain the title of world leader in semiconductor manufacturing. Part of that plan was a huge investment in new fabrication facilities to help increase production of future chips. The company has now revealed a small town near Columbus Ohio will be the future home of its next $20 billion mega-facility.
Intel’s expansion into Ohio is a big deal, as it marks the first time the company has expanded its operations to the Midwest, and it will be the only facility of its kind in this part of the country. Currently it has silicon fabrication facilities in Chandler, Arizona, where it will also be building two new fabs in the years to come. In an interview with Time, Intel’s senior vice president of manufacturing, supply chains and operations said the company looked at 38 sites overall before choosing New Albany, which is a small town about 18 miles outside of Columbus. One of the reasons Intel chose the site was the state agreed to provide $1 billion in infrastructure improvements ahead of its arrival, including widening a highway to allow for less congestion to and from the facility.
Intel will also get “job creation” tax credits for 30 years, thanks to a law passed by the state legislature to bump it up from the previous 15 years, which was an effort designed to attract “mega projects” such as Intel’s new fab. CEO Gelsinger said he hopes Intel’s move to the Midwest will mark the creation of the “Silicon Heartland.” The new site will be part of the Intel Foundry business, which makes chips for third parties, and it will make chips for Intel as well.
Despite the company’s investment in American labor, it will still be sending the chips overseas for their final phases of assembly, packaging, and testing. Just a month ago Gelsinger was in Malaysia announcing a $7.1 billion investment in a new facility there as well, so clearly Intel is starting to open up its check book to get the ball rolling on future facilities. However, this has lead analysts to ponder who Intel will be selling all these future chips to, since its sales were mostly stagnant in 2021. For example, according to a semiconductor analyst at Bank of America mentioned in the Time article, the semiconductor industry grew at 25 percent last year, but Intel only saw one percent growth. This goes along with industry forecasts we wrote about in November last year, which predicted negative one percent growth for Intel in 2022. Intel also recently lost Apple as a customer to TSMC, and it doesn’t make mobile processors.
In response, Intel says it needs the government to provide subsidies so that it can ramp up its new facilities more quickly, and once it’s done so there will be enough demand from the auto industry and its high performance computing group to cover areas where it doesn’t compete. To be fair to Intel, it is apparently keen on entering new markets. It is also about to take on both AMD and Nvidia in the GPU market with its first all-new product, Arc Alchemist. One straightforward way Intel could keep its fab utilization higher is to stop farming out some of its semiconductor manufacturing to TSMC. Currently Intel contracts with the Taiwanese foundry for at least some of its FPGAs, chipsets, and GPU manufacturing.
All of this is part of the company’s plan to become the world’s leading silicon designer and fabricator by the year 2025, which is an ambitious goal. While Intel was struggling with its 14nm and 10nm parts, Taiwanese-based TSMC was able to advance its capabilities by several generations. In fact, Intel itself is currently trying to secure 3nm wafer capacity from TSMC for its 2023 Meteor Lake chips, as it currently doesn’t have the ability to fabricate chips on that node. The company plans to close the gap with TSMC over the next few years.
Despite this situation, Intel is clearly feeling bullish about the future, with its CEO declaring recently that AMD is “in the rear view” permanently thanks to the company’s launch of its first hybrid CPU design, Alder Lake. “We are back in the game!” he exclaimed, but as our managing editor recently noted, one competitive chip does not a comeback make.