Intel is planning a $100 billion ‘spending spree’ in four US states to build and expand factories after securing $19.5 billion in federal grants and loans, and hopes to secure another $25 billion in tax breaks.
The centrepiece of Intel’s five-year spending plan is to turn land near Columbus, Ohio, into what CEO Pat Gelsinger told reporters on Tuesday would be “the world’s largest AI chip manufacturing facility” from 2027.
The US government announced on Wednesday that it would provide Intel with federal funding under the CHIPS Act, and Intel shares rose 4% in pre-market trading.
Intel’s plan also includes renovating facilities in New Mexico and Oregon and expanding operations in Arizona, where long-time rival Taiwan Semiconductor Manufacturing Co (TSMC) is building a large factory.
For decades, Intel led the world in staying one step ahead by producing the fastest and smallest semiconductors, selling them at a premium and reinvesting the profits in more research and development.
But it lost this manufacturing edge to TSMC in the 2010s, and profit margins fell as it slashed prices to maintain market share with lower-quality products.
Gelsinger announced a plan to return Intel to the number one position in 2021, but said he would need government support to make the plan profitable.
Gelsinger said about 30% of the $100 billion plan will be spent on construction costs such as labour, pipes and concrete. The rest will be used to buy chip-making tools from companies such as ASML, Tokyo Electron, Applied Materials and KLA.
These tools will help the Ohio facility become operational in 2027 or 2028, but Gelsinger warned that the timeline could slip if the chip market slumps. Aside from grants and loans, Intel plans to pay for most of the acquisitions out of existing cash flow.
Gelsinger had previously said that a second round of US funding for chip factories would be needed for the US to regain a leading position in semiconductor manufacturing, and reiterated this on Tuesday.
“It took us more than three decades to lose this industry. It’s not coming back with three to five years of CHIPS Act financing,” Gelsinger said, calling the low-interest financing ‘smart capital’.
Jimmy Goodrich, a semiconductor export and technology consultant at RAND, told Reuters that Intel will be the most important chipmaker for US interests even if its rivals manufacture in the country.
“Only Intel has a largely US-based workforce, technology and supply chain. So while what TSMC and Samsung are doing here is important and should be welcomed, it’s also important to have a strong home team,” Goodrich said.
