multibillion-dollar revival plan is a growing view among tech executives that booming demand for computer chips will continue beyond the pandemic.
, the world’s leading contract chip maker, in January pledged to spend up to $28 billion on plant investments this year, a record for that company and a 47% annual increase.
“Everything is becoming more digital and we are saying Intel is stepping into that gap aggressively to help provide the capacity that’s needed,” Intel Chief Executive
said Tuesday as he rolled out his turnaround plan for the company. The embrace of more digital tools fueling that demand, he said, was only accelerated by the pandemic.
joining his Intel counterpart by video at the chipmaker’s strategy rollout, said that “we’re entering a complete new era as computing becomes embedded in our world.”
Mr. Nadella expects spending on technology, currently at about 5% of gross domestic product, will accelerate. “It’s going to double in the next 10 years to 10%,” he said last month.
Even before Intel’s latest investment plan the semiconductor industry was on pace for record capital spending, market research firm IC Insights said. The industry globally was expected to plow a record $129.4 billion into things such as new plants and equipment, up around 14% from a year ago.
Intel became America’s chip-making icon over decades by designing the most advanced chips and making them in-house. But it stumbled in recent years, falling behind rivals that typically specialized either in chip design or production.
, which outsources all chip-making, last year surpassed Intel as the most valuable U.S. semiconductor company. TSMC, meantime, grew to become the dominant contract chip maker, or foundry as they are called.
Mr. Gelsinger on Tuesday also said that Intel would spend $20 billion over several years on two new U.S. chip factories. They would underpin the company’s desire to make chips designed by others, he said, such as by Microsoft,
The planned outlays by Intel and other chip makers are especially focused on the U.S., in response to concerns about recent chip shortages affecting auto companies and other domestic businesses as well as to America’s dependence on chip production in Asia, given tension with China.
Intel’s two planned new plants are to be built in Arizona. TSMC also is building a new U.S. chip facility and
is considering a $17 billion investment in U.S. chip factories.
President Biden last month pledged to fix the chip shortages and ordered a review to identify ways to strengthen supply chains in critical fields such as semiconductors. Lawmakers have pledged billions of dollars to boost domestic chip-making.
U.S. Commerce Secretary Gina Raimondo welcomed Intel’s Arizona expansion plan. “Intel’s investment will help to preserve U.S. technology innovation and leadership,” she said.
Europe also wants to grab a large share of the chip market. Intel said that in addition to more U.S. investment it is also eyeing expanded chip-making capacity overseas.
“There is sort of a step change in the demand,” said
research vice president at Gartner. “Semiconductors are just becoming more and more critical across technologies.”
Intel’s bullishness on the chip outlook is leading it into territory where it has faltered before—its plan to make chips for others instead of just its own designs. “Obviously, there will be many questions whether Intel can be successful as a foundry given failure in the past,” Evercore ISI analyst
said in a note. But, he added, the plan Intel laid out Tuesday “suggests this is a much more serious endeavor under current leadership.”
But the effort comes with pitfalls, including complicating Intel’s relationship with TSMC and Samsung. Intel now will be vying for some of the business the two Asian contract chip makers go after. Both also are key partners with Intel and part of Mr. Gelsinger’s plans to outsource more of its own chip-production work to help bring its devices to market more reliably after past delays.
Citi analysts, in a note Wednesday, said TSMC may need to make changes in how it operates, including new safeguards around its intellectual property.
TSMC shares slipped more than 3% in Wednesday trading after Intel unveiled its plan. Samsung’s stock retreated about 1%.
TSMC and Samsung didn’t respond to requests for comment.
Write to Robert Wall at [email protected]
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