A semiconductor board during an Intel event before an IFA International Consumer Electronics Show.
Krisztian Bocsi | Bloomberg | Getty Images
Intel announced Tuesday that it will spend $ 20 billion to build two new chip factories, called fabs, in Ocotillo, Arizona.
Intel shares rose up 5% on news during Tuesday’s extended trading.
The announcement, which coincides with new CEO Pat Gelsinger’s first public remarks since taking office, indicates that Intel will continue to focus on production during industry changes, which have led competitors to increasingly separate chip design and manufacturing. .
The news comes during a global chip shortage, which is scouring the automotive and electronics industries and worries that the US is lagging behind in terms of semiconductor manufacturing.
“Intel is and will remain a leading developer of process technology, a major semiconductor manufacturer and largest global silicon supplier,” Gelsinger said.
Intel also said it will act as a “foundry” or production partner for other chip companies that focus on semiconductor design, but need a chip company. Intel said its foundry subsidiary will be called Intel Foundry Services and will be led by Randhir Thakur, Intel’s current senior vice president.
Gelsinger said the foundry business will compete in a $ 100 billion potential market by 2025 and will produce a range of chips, including chips based on ARM technology, which are used on mobile devices, and has historically competed with Intel’s favored x86 technology.
A slide posted by Intel suggested that companies such as Amazon, Google, Microsoft and Qualcomm could be customers of the business. Microsoft CEO Satya Nadella appeared at Gelsinger’s discussion in a demonstration of support for the Intel movement.
Why Intel is opening new factories
Intel’s commitment to production has implications for national security. Intel said it is partnering with IBM to improve chip logic and packaging technologies, which will “increase the competitiveness of the US semiconductor industry and support key US government initiatives.”
Intel currently operates four factories, called wafer fabs, in the United States. In addition to its expanding Arizona site, it also has fabs in Massachusetts, New Mexico and Oregon. It also produces chips in Ireland, Israel and has a single fab in China.
The Intel Foundation will offer an American and European alternative to chip factories in Asia.
In February, President Joe Biden said domestic semiconductor manufacturing is a priority for his administration. His administration hopes to address the lack of chips and address lawmakers’ concerns that outsourcing chip processing has made the US more vulnerable to supply chain disruptions.
In an executive action, Biden began a 100-day review that could boost US chip companies with additional government support and new policies.
“Today’s executive order, combined with full funding for the CHIPS Act, can help balance the conditions of global competition for driving semiconductor production, allowing U.S. companies to compete on an equal footing with foreign companies heavily subsidized by their governments,” Intel said. at the time in response to the executive order.
Gelsinger took over Intel on February 15 from former CEO Bob Swan. Although he was the latest CEO of VMWare, he began his career at Intel and his appointment was considered a return.
He took over a company facing a variety of challenges. Intel had lost its semiconductor production advantage over its Asian rivals, especially TSMC. The most advanced Intel chips use a 14 nanometer process or a 10 nanometer process. Intel designs both chips, then makes them in its own factories, called fabs.
But competitors, including Intel customers like Apple and rivals like AMD, only design the processor, then manufacture it from an external chip factory. These chip factories, such as TSMC and Samsung, use a more advanced 5-nanometer process, which is superior because more transistors can fit into the chip of the same size, increasing power and efficiency.
“We will pursue customers like Apple” for Intel’s foundry business, Gelsinger said.
Gelsinger said on Tuesday that its 7-nanometer chips are about to reach a milestone in the second quarter and that it intends to manufacture most of its products on its own. However, Intel will increase its use of third-party foundries, including TSMC, Samsung and GlobalFoundries, he said.
Intel also announced year-round guidance. The company said it expects $ 4.55 in adjusted earnings per share of $ 72 billion, below Refinitive estimates of $ 4.77 in adjusted earnings per share and $ 72.94 billion in earnings per share. Intel said it expects $ 19 billion to $ 20 billion in capital spending for that year. Analysts surveyed by FactSet expected $ 14.59 billion.
CNBC’s Jordan Novet contributed to this story.