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Intel to invest at least $20 billion in new chip factories in Ohio

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Intel to invest at least $20 billion in new chip factories in Ohio

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Intel has chosen Ohio for a new chip-making complex that would cost at least $20 billion, stepping up efforts to boost U.S. production of computer chips as users grapple with a continuing shortage of vital components.

Intel said the new site near Columbus would initially have two chip factories and directly employ 3,000 people, while creating additional jobs in construction and at nearby businesses, a person with knowledge of the matter said. But that’s probably just the beginning.

Patrick Gelsinger, who became Intel’s chief executive last year, quickly increased the company’s investment in manufacturing to help reduce the United States’ dependence on foreign chipmakers while making pressure on Congress to pass incentives to increase domestic chip production. He said Intel could invest up to $100 billion over a decade in its next U.S. manufacturing campus, tying the scope and speed of that expansion to expected federal grants if Congress approves a spending package. known as the CHIPS Act.

“We’ll go bigger and wider if it gets funded,” Gelsinger, 60, said in a recent interview. “But our recovery plans are not based on the CHIPS law.”

Intel’s decision has geopolitical implications, as well as significance for supply chains. The chips, which act as the brains of computers and many other devices, are largely made in Taiwan, over which China has expressed territorial claims. During the pandemic, they have also been in short supply due to overwhelming demand and Covid-related disruptions to manufacturing and labor supply, raising questions about how to ensure a coherent chip pipeline.

Biden administration officials, who have aggressively pushed the CHIPS law, are expected to discuss Intel’s announcement on Friday.

Intel has scheduled a webcast to discuss the expansion on Friday. This move is Intel’s first to a new manufacturing state in more than 40 years. The company, based in Silicon Valley, has US factories in Oregon, New Mexico and Arizona. Last March, Mr. Gelsinger selected an existing complex near Phoenix for a $20 billion expansion, which is now underway.

But Mr. Gelsinger had also claimed that a new location was needed to provide additional talent, water, electricity and other resources for the complex chip-making process. Intel has combed the country for sites, prompting states to compete for one of the biggest economic development prizes in recent memory.

The site chosen for the new plant, in New Albany, a suburb east of Columbus, is in an area known for its land and cheap housing. The nearby Ohio State University is a major source of engineering graduates Intel could recruit. Columbus is also centrally located to receive supplies and to ship finished chips.

The site’s selection was reported last week by The Plain Dealer and Cleveland.com. Intel confirmed this choice to Time on Thursday.

Mr Gelsinger, a 30-year veteran of Intel who became head of software maker VMware in 2012, returned to the chipmaker last year to become chief executive as semiconductor shortages began to hamper automakers and other businesses.

While the shortage was partly rooted in the pandemic, another long-term driver was the shift of chip manufacturing to Asian countries that offer subsidies to companies building factories there. The United States accounts for about 12% of global chip production, up from 37% in 1990. Europe’s share fell from 40% to 9% during this period.

Many of the most advanced chips come from Taiwan Semiconductor Manufacturing Company, whose proximity to China worries Pentagon officials.

Legislation passed by the Senate with bipartisan support last June would provide $52 billion in subsidies to the chip industry, including grants to companies building new US factories. The package has since been caught up in House wrangling 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 package of grants that could help build a large new Intel factory there, with a projected price tag comparable to the US expansion.

Ohio previously had no presence in chip manufacturing. Moving to a state without existing chip factories presents challenges, such as obtaining permits and persuading suppliers of gas, chemicals and production machinery to set up offices nearby, said analyst Dan Hutcheson. at VLSI Research. On the other hand, having factories in more states provides lobbying leverage in Washington, he said.

Intel isn’t the only company expanding production in the United States. TSMC began construction last year on a $12 billion complex about 80 km from Intel’s site near Phoenix. Samsung Electronics has selected Taylor, Texas for a $17 billion factory, slated to begin construction in 2022.

Part of Mr. Gelsinger’s strategy is betting that Intel can compete with TSMC and Samsung in making chips to order for other companies. For most of its existence, Intel only built the microprocessors and other chips it designs and sells itself.

The strategy is risky, as Intel has fallen behind its Asian rivals by packing more circuitry on each silicon wafer, increasing the capabilities of devices like smartphones and computers. Gelsinger said Intel is on track to catch up on several years, but it won’t be easy as these companies continue to do their own development.

Intel is “catching up, but they haven’t,” Hutcheson said.

Intel to invest at least $20 billion in new chip factories in Ohio

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