Intel Corp says it will greatly expand its advanced chip manufacturing capacity as the United States-based technology giant’s new chief executive announced plans to spend as much as $20bn to build two factories in Arizona and open its plants to outside customers.
The announcement by CEO Pat Gelsinger aims to restore Intel’s reputation after manufacturing stumbles sent shares plunging last year. 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) and South Korea’s Samsung Electronics Co Ltd.
And it will aim to tilt a technological balance of power back to the US 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 shares rose 7.5 percent after the company disclosed its new strategy and full-year financial guidance for 2021. Some investors such as Third Point LLC had previously urged Intel to consider spinning off its costly chip manufacturing operations.
Intel said it expects $72bn in revenue and adjusted earnings per share of $4.55, compared with analyst estimates of $72.9bn and $4.77 per share, according to Refinitiv data. The company said it expects to spend $19bn to $20bn on capital expenditures.
Gelsinger said the 2021 forecast “reflects the industry-wide shortage” of some components.
‘All systems go’
Intel is one of the few remaining semiconductor companies that designs and manufactures its own chips. Rival chip designers such as Qualcomm Inc and Apple Inc rely on external contract manufacturers.
In an interview with the Reuters news agency, 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 large manufacturing expansion.
That will include spending $20bn on two new factories at an existing campus in Chandler, Arizona, that will create 3,000 permanent jobs. Intel will then work on future sites in the US and Europe, Gelsinger said.
Intel will use those factories to make its own chips but also open them to outside customers in what is known as a “foundry” business model in the chip industry. Gelsinger said the new factories will focus on cutting-edge computing chip manufacturing, rather than the older or specialty technologies that some manufacturers such as GlobalFoundries specialise in.
“We are absolutely committed to leading process technology capabilities at scale for the industry, and for our customers,” Gelsinger said, adding that Intel has lined up customers for the new factories but could not disclose their names.
He said on a webcast on Tuesday that Amazon.com Inc, Cisco Systems Inc, Qualcomm Inc and Microsoft Corp support its efforts to offer chip manufacturing services. On a conference call, Gelsinger said that Intel “will pursue customers like Apple.”
Intel dominated the $400bn industry for decades by making the best designs in its own cutting-edge factories. That strategy crumbled in recent years as the company missed deadlines for new production technology, while most other chipmakers tapped foundry specialists to make their designs.
