Intel has chosen Ohio to build a new chip manufacturing facility that would cost at most $20 billion. This is a major step in the effort to increase U.S. computer chip production as Americans struggle with a shortage of vital components.
Intel stated Friday that the new Columbus site would initially have two chip factories. The site would also directly employ 3,000 workers. In addition to creating 7,000 construction jobs, there would be tens of thousand permanent positions at suppliers.
Patrick Gelsinger, who became Intel’s chief executive last year, has rapidly increased the company’s investments in manufacturing to help reduce U.S. reliance on foreign chip makers while lobbying Congress to pass incentives aimed at increasing domestic chip production. He stated that Intel planned to invest up to $100 billion in Ohio over a decade to construct eight factories. This expansion will be linked to the expected federal grants if Congress approves the CHIPS Act spending package.
“We are putting our chips on the table,” Mr. Gelsinger said at White House event on Friday. “But this project will be bigger and faster with the CHIPS Act.”
President Biden has actively pushed the legislation. He argued that the CHIPS Act as well as U.S. investment by Intel and other chips makers were vital for the economy and national security.
“China is doing everything it can to take over the global market,” he said.
Intel’s move has wide-ranging geopolitical implications, as well as significance for supply chains. The brains of computers and other devices are made from chips. This is a large part of the production process in Taiwan, which China claims. They have been in short supply due to overwhelming demand and coronavirus-related disruptions of manufacturing and labor supply. This has raised questions about how to ensure a consistent chip supply.
The move is Intel’s first to a new state for manufacturing in more than 40 years. The company is headquartered in Silicon Valley and has U.S. plants in Arizona, New Mexico, and Oregon. Mr. Gelsinger selected a Phoenix-area complex last March for a $20 billion expansion. This is currently underway.
Gelsinger stated, however, that a new site was required to provide additional talent and electrical power for the complex process involved in making chips. Intel has searched the country looking for suitable sites and states have been invited to compete for one the largest economic development prizes in recent times.
The new plant will be located in New Albany, an area east of Columbus that is known for its affordable land and housing. Intel could recruit engineering graduates from Ohio State University. Columbus is centrally located for receiving supplies as well as shipping finished chips.
Intel stated that construction of the first two factories will begin in the latter part of this year and production will begin by 2025. The site, which Mr. Gelsinger called a catalyst for a new “Silicon Heartland,” is more than 1,000 acres and is expected to be the largest economic development project in Ohio’s history.
“Intel’s new facilities will be transformative for our state, creating thousands of good-paying jobs in Ohio manufacturing strategically vital semiconductors,” Mike DeWine, the governor of Ohio, said in a statement.
Mr. Gelsinger is a 30-year Intel veteran and was named chief of VMware’s software company in 2012. Last year, he returned to the chipmaker to serve as chief executive after the semiconductor shortage hampered other companies.
The pandemic caused the shortage partially, but the long-term shift in chip manufacturing to Asian countries, which offer subsidies for companies that build factories there, was another factor. The United States is responsible for approximately 12 percent of the global chip production, a decrease from 37 percent in 1990. Europe’s share has declined to 9 percent from 40 percent over that period.
Many of the most advanced chips are made by Taiwan Semiconductor Manufacturing Company. This company’s proximity to China has worried Pentagon officials.
With bipartisan support, the Senate passed legislation last June that would provide $52billion in subsidies for chip industry. It also grants grants to companies who build new U.S. facilities. The package has since become caught up in House bickering over the Biden administration’s priorities, though Mr. Gelsinger and others have said they are hopeful it will pass in the coming months.
In Europe, Mr. Gelsinger also lobbyed for similar subsidies to aid the construction of a large new Intel factory. The price tag is expected to be comparable with the U.S. expansion.
Ohio has never previously had a chip manufacturing industry. According to Dan Hutcheson, VLSI Research analyst, moving to a state without chip factories can present challenges. These include obtaining permits and convincing suppliers of chemicals, gases and production machines to set-up nearby offices. He said that having plants in more states gives Washington some leverage.
Intel isn’t alone in expanding U.S. manufacturing. T.S.M.C. began construction last year on a $12 billion complex about 50 miles from Intel’s site near Phoenix. Samsung Electronics chose Taylor, Texas for a $17 Billion factory. Construction is expected to begin in 2022.
Mr. Gelsinger’s strategy is based partly on a bet that Intel can rival T.S.M.C. In manufacturing chips for other companies, Samsung and Intel are the leaders. Intel has been making chips for other companies for most of its existence.
The strategy is risky because Intel has fallen behind Asian competitors in packing more circuitry onto each piece of silicon. This increases device capabilities like smartphones and computers. Mr. Gelsinger has said that Intel is on track to catch up over several years, but it won’t be easy, as those companies continue to make new developments of their own.
Intel “is catching up, but they have not caught up,” Mr. Hutcheson said.
Source: NY Times