Intel has chosen Ohio to build a new chip manufacturing facility that will cost at least $20 billion, ramping up efforts to boost U.S. computer chip production as users grapple with a lingering shortage of vital components.
Intel said the new facility near Columbus will initially have two chip factories that will directly employ 3,000 people and will create additional jobs in construction and nearby businesses, a person with knowledge of the matter said. But this is most likely just the beginning.
Patrick Gelsinger, who became Intel’s chief executive last year, quickly ramped up the company’s investment in manufacturing to help reduce US dependence on foreign chip makers while lobbying Congress for stimulus to boost domestic chip production. He said Intel could invest up to $100 billion over ten years in its next U.S. manufacturing campus, tying the scale and speed of that expansion to expected federal grants if Congress approves a spending package known as the Chip Act.
“We will get bigger and wider if the funding is there,” the 60-year-old Mr. Gelsinger said in a recent interview. “But our recovery plans are not based on the CHIPS act.”
Intel’s actions have geopolitical implications as well as supply chain implications. The chips that act as the brains of computers and many other devices are mainly made in Taiwan, which China has claimed territorial claims over. They were also in short supply during the pandemic due to huge demand and Covid-related disruptions in production and workforce, raising questions about how to ensure a stable chip pipeline.
Biden administration officials, who have been pushing hard for the chip bill, are expected to discuss Intel’s announcement on Friday.
Intel scheduled a webcast to discuss the expansion on Friday. This is Intel’s first transition to a new level of production in more than 40 years. The Silicon Valley-based company has US factories in Oregon, New Mexico, and Arizona. Last March, Mr. Gelsinger selected an existing facility near Phoenix for a $20 billion expansion now underway.
But Mr. Gelsinger also argued that the new site is needed to provide additional workers, water, electricity and other resources for the complex chip manufacturing process. Intel has scoured the country for sites, prompting states to compete for one of the biggest economic development prizes in recent memory.
The location chosen for the new plant in New Albany, a suburb east of Columbus, is in an area known for low-cost land and housing. The nearby Ohio State University is a major source of graduates with engineering degrees that Intel could hire. Columbus is also located in the city center to receive materials and ship finished wood chips.
The choice of the site was reported last week by The Plain Dealer and Cleveland.com. Intel confirmed Time’s choice on Thursday.
Mr. Gelsinger, a 30-year Intel veteran who became head of software maker VMware in 2012, returned to the chip maker last year to become chief executive as semiconductor shortages began to drag automakers and other companies.
While the shortage was partly due to the pandemic, another long-term factor has been the shift of chip manufacturing to Asian countries that offer subsidies to companies building factories there. The United States accounts for about 12 percent of the world’s chip production, up from 37 percent in 1990. Europe’s share dropped from 40 percent to 9 percent over this period.
Many of the most advanced chips are made by the Taiwan Semiconductor Manufacturing Company, whose proximity to China worries Pentagon officials.
A bill passed by the bipartisan Senate last June provides for $52 billion in subsidies for chip manufacturing, including grants to companies that build new factories in the US. The package has since been bogged down in House wrangles over the Biden administration’s priorities, though Mr. Gelsinger and others have said they hope it passes in the coming months.
In Europe, Mr. Gelsinger has also lobbied officials for a similar subsidy package that could help build a large new Intel plant there at a projected cost comparable to a US expansion.
Ohio had no chip manufacturing before. According to Dan Hutcheson, an analyst at VLSI Research, moving to a state with no existing chip factories comes with challenges such as obtaining permits and persuading gas, chemical and manufacturing equipment suppliers to set up nearby offices. On the other hand, having factories in more states provides lobbying leverage in Washington, he said.
Intel is not the only company expanding manufacturing in the US. Last year, TSMC began building a $12 billion complex about 50 miles from an Intel site near Phoenix. Samsung Electronics has selected Taylor, Texas to build a $17 billion plant, with construction due to begin in 2022.
Mr. Gelsinger’s strategy is partly based on the fact that Intel can compete with TSMC and Samsung in the production of chips for other companies. For most of its existence, Intel made only those microprocessors and other chips that it developed and sold itself.
This strategy is risky as Intel has lagged behind its Asian rivals in placing more circuitry on each piece of silicon, increasing the capabilities of devices such as smartphones and computers. Mr. Gelsinger said that Intel is going to catch up within a few years, but it won’t be easy as these companies continue to create their own new designs.
Intel is “catching up, but not catching up,” Mr. Hutcheson said.