Intel invest $20 billion in battle against chip shortage

Intel invest $20 billion in battle against chip shortage

Intel, the California-based tech giant confirmed last week that it would spend $20 billion on a new semiconductor fabrication site just outside of Columbus, Ohio. According to the computer tech multinational, the new site is set to create 3,000 Intel jobs and will begin producing chips in 2025.

Intel also hinted that this would not be the end of its investment with the company noting that the 3,000 expected jobs are only part of the “initial phase” of Intel’s Ohio operations. Intel further claimed in its announcement that the Jersey Township, Ohio, site could accommodate up to eight factories and draw as much as $100 billion of investment.

The company did however reveal that it only plans to build the first two factories in the initial phase with construction expected to begin later this year before it starts producing chips in three years.

Pat Gelsinger, CEO of Intel, proudly declared that the move shows Intel “leading the effort to restore U.S. semiconductor manufacturing leadership.”

“Intel’s actions will help build a more resilient supply chain and ensure reliable access to advanced semiconductors for years to come,” Gelsinger added. He also suggested that Intel might expand the site in the future, stating that the two factories “will create a new epicenter for advanced chipmaking in the U.S.”

The governor of Ohio, Mike DeWine, also welcomed the news, calling the announcement “monumental news” for the state. The press release from the governor’s office states that the $20 billion project represents the largest single private company investment in state history.

“Advanced manufacturing, research and development, and talent are part of Ohio’s DNA, and we are proud that chips—which power the future—will be made in Ohio, by Ohioans,” DeWine said. The planned factories will be Ohio’s first semiconductor manufacturing plants.

The latest investment in Ohio mirrors Intel’s announcement in March 2021 about investing $20 billion in a pair of new plants in Arizona as the company seeks to find US-based solutions to the ongoing silicon chip shortage.

The chip shortage, which has been arguably caused (and certainly worsened) by the COVID pandemic, has highlighted the weaknesses in the global silicon supply chain which is dependent on overseas transport from Korea and Taiwan, the world’s largest microchip producers. In addition to the covid-19 related issues, a drought in Taiwan certainly didn’t help chip production as the process typically requires voluminous amounts of water. To alleviate these problems, the Taiwan Semiconductor Manufacturing Company, one of the largest Taiwanese chip manufacturers, announced a three-year plan to invest $100 billion in new fab construction in April 2021.

One of the major consequences of the chip shortage has been on automobile production which has particularly suffered during the ongoing shortage. Unsurprisingly, car sales were revealed to have dropped in the E.U. and the UK with Honda and Toyota downgrading their sales forecasts by double digits and Nissan delaying the launch of its first 100% electric vehicle. This downturn was also reflected in the US with US vehicle production stalled and leading manufacturer Stellantis announcing suspension of production at five factories that affected companies such asJeep, Chrysler, and Dodge. 

At the Intel plant announcement, The Ohio State University President Kristina M. Johnson, an electrical engineer who is no stranger to the industry, having worked with semiconductor manufacturers in her pre-academic days, noted that visitors to the event were likely to have passed empty car lots as they drove to the site from Columbus, saying that $30,000 cars were going unsold because of $2 microchips.

 

Many other industries, such as consumer electronics and robotics, are also dependent on chips which exacerbates the problem. This is reflected in Apple, for example, having to reduce its iPhone 13 output forecast owing to the shortage. The severity of the chip shortage has led the government to take action, including semiconductor summits at the White House and negotiations between the US and the EU.

Intel is not the only company to have announced new fab construction, with other leading players doing their part to fight the ongoing chip shortage. GlobalFoundries Inc, for example  announced a $1 billion expansion for a new fab at the company’s campus in Malta, New York in July 2021 and also entered into a strategic collaboration with Ford to boost chip manufacturing and technology development. Similarly, Texas Instruments  also revealed that it plans to invest as much as $30 billion for as many as four new fabs in Sherman, Texas in November 2021.