Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

Intel to spend $20 billion on U.S. chip plants as CEO challenges Asia dominance

Stock Markets Mar 23, 2021 06:05PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: An Intel Tiger Lake chip is displayed at an Intel news conference during the 2020 CES in Las Vegas
 
INTC
+0.61%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
MSFT
-0.59%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CSCO
+0.42%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
QCOM
-0.97%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AAPL
-2.11%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AMZN
-1.63%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Stephen Nellis

(Reuters) - Intel Corp (NASDAQ:INTC) will greatly expand its advanced chip manufacturing capacity as the new chief executive announced plans to spend as much as $20 billion to build two factories in Arizona and to open up its factories to outside customers.

The move by CEO Pat Gelsinger on Tuesday aims to restore Intel's reputation after manufacturing delays 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 Korea's Samsung Electronics (OTC:SSNLF) Co Ltd.

And it will also aim to tilt a technological balance of power back to the United States 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 6.3% after the company disclosed its new strategy and full-year financial guidance for 2021. Some investors such as Third Point (NYSE:SPNT) LLC had previously urged Intel to consider spinning off its costly chip manufacturing operations.

Intel said it expects $72 billion in revenue and adjusted earnings per share of $4.55, compared with analyst estimates of $72.9 billion and $4.77 per share, according to Refinitiv data. The company said it expects to spend $19 billion to $20 billion on capital expenditures.

Gelsinger said that 2021 forecast "reflects the industry-wide shortage" of some components such as substrates.

Intel is one of the few remaining semiconductor companies that both designs and manufactures its own chips. Rival chip designers such as Qualcomm (NASDAQ:QCOM) Inc and Apple Inc (NASDAQ:AAPL) rely on contract manufacturers.

In an interview with Reuters, 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 massive manufacturing expansion.

That will include spending $20 billion 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 United States and in Europe, Gelsinger said.

Intel will use those factories to make its own chips but also open them to outside customers in what is called a "foundry" business model in the chip industry. Gelsinger said the new factories will focused on cutting-edge computing chip manufacturing, rather than the older or specialty technologies that some manufacturers such as GlobalFoundries specialize in.

"We are absolutely committed to leading process technology capabilities at scale for the industry, and for our customers," Gelsigner said, adding that Intel has lined up customers for the new factories but could not disclose their names.

He did say on a webcast Tuesday that Amazon.com Inc (NASDAQ:AMZN), Cisco Systems Inc (NASDAQ:CSCO), Qualcomm Inc and Microsoft Corp (NASDAQ:MSFT) support its efforts to offer chip manufacturing services.

The move is a direct challenge to TSMC and Samsung (KS:005930). The two have come to dominate semiconductor manufacturing business, moving its center of gravity from the United States, where much of the technology was once invented, to Asia, where more than two-thirds of advanced chips are now manufactured.

Gelsinger said Intel will aim to change that global balance by embracing the foundry business where it historically has been a minor player. Intel will offer chip customers the ability license out its own technological crown jewels - known as the x86 instruction set architecture - as well as offer to build chips based on technology from Arm Ltd or the emerging open source technology RISC-V, he said.

"We will be picking our next sites within the next year for U.S. and Europe," he said.

Intel also announced plans for new research collaboration with IBM (NYSE:IBM) focused on computing chip and packaging technology.

But even as Intel jumps into competition with TSMC and Samsung, it also plans to become a larger customer of theirs by turning to them to make subcomponents of its chips called "tiles" to make some chips more cost-effectively.

"I'll pick the best process technologies wherever they exist," Gelsinger said. "I leverage internal and external supply chains. I'll have the best cost structure. That combination of supply, products and costs, we think is a killer combination."

Intel to spend $20 billion on U.S. chip plants as CEO challenges Asia dominance
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
Woon soo Lee
Woon soo Lee Mar 24, 2021 11:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hopefully the new chip plants boost the business development infrastructure expenditures bullish sentiments community growth for more jobs soon and compete rivals with new technology process in terms of costs and new products chip partnership with IBM
Ad Cline
Ad Cline Mar 24, 2021 12:18AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
david9(Chinese bot) China as been lying about their economy for decades. your country is guilty of crimes against humanity your leadership is running China like its the heir to the Germany of 1939. to think you work for a country like that.. China is developing to be the most oppressive country on the planet. they steal to get what they want. intellectual property is their specialty. with out the West they would still be looking for hand outs to feed their people. What there really good at is building massive concentration camps for their minorities. China is no longer considered a civilized country.
David David
David9 Mar 24, 2021 12:18AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
if China is so bad then explain to us why YouTubers have shown us a totally different China... explain why China is on track to become the biggest economy within the next 5 yrs.... explain why Buffett said China has found their secret sauce.... explain now...
David David
David9 Mar 24, 2021 12:18AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
If China is so oppress, then please explain to us why there are many Youtubers proving that everything the western media has portrayed China is so so far from reality. China is a Giant and all data shows they will be the biggest economy within 5 years... Warren Bufffet even said... China has found their secret sauce... explain now...
Ad Cline
Ad Cline Mar 23, 2021 11:45PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
the Chinese will have new troubles with the new Intel fans. they will be built with new security protocols China will have a tough time stealing the new chip technologies that Intel will be developing at these new fabs. China will continue to fall further behind the West in innovation and new technologies.
David David
David9 Mar 23, 2021 11:45PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China Lion has identify the problem.... they are problem solvers... they already put in a 5 year plan that will take them to dominate the chips... This China Lion is all set to breed chips...
NoToO MW
NoToO MW Mar 23, 2021 9:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Once giving up chip manufacturing and foundry for its economic inefficency. That’s reasonable for shareholders. But now picking it up for a political reason? A private company doing sth for politics is not a good sign for shareholders. Good luck to 20 billion or shall we kiss the money goodbye?
Chris Sundo
Chris Sundo Mar 23, 2021 9:14PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Americans are too slow in the head and body to be competitive as Trump & Co. proved just recently. It'll be an expensive undertaking at taxpayer's expense (Intel wants tax advantages) and with Americans slow to catch on to anything (many still have trouble understanding the mask and social distancing issues and picking fights among spring breakers, fully 13 mos after the rules were put up black on white, I'm afraid it's gonna be a MAKE WORK project)
Ad Cline
Ad Cline Mar 23, 2021 9:14PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
the Chinese with be shaking in their boots ir will mean the gap in innovation that the Chinese have always suffered from will only get worse. their own political system continually hampers innovation and independent thinking, so the have learned to steal other people's ideas and intellectual property to compete.
David David
David9 Mar 23, 2021 9:14PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Ad Cline lol... if we talk about nee tech... China is leading in all cylenders... 5 year plan later.... China will dominate the chips with an Iron Fist. 👊 🤛
Joe Wiggs
Joe Wiggs Mar 23, 2021 8:25PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Intel has yet to develop a 5 or 3 nanometer chip. Intel modem was horrible, so they sold that unit. They sold the memory unit. Call me skeptical
Joe Wiggs
Joe Wiggs Mar 23, 2021 8:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Intel excitement from this announcement will quickly fade. Two factories will be operational in 2024/25?
NoToO MW
NoToO MW Mar 23, 2021 8:22PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
As TSMC’s 2016 factory starts operation this year, my best guess for Intel is 2025/2026 or even later.
Yiannis Tsoutsoukis
Yiannis Tsoutsoukis Mar 23, 2021 7:16PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Too much talk from Gelsinger but I see disappointment coming soon. This is where it goes buy the rumors sell the news. He just appointed as CEO and already spend 20 billionand who knows what he may achieve. If nothing comes out of this then he will send Intel's shares to tartars and open the path for Lisa Su to achieve further growth for AMD. I have a feeling that this man won't help Intel at all.
David David
David9 Mar 23, 2021 6:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Intel is an old Tiger.... they can't compete with the new breed of companies coming on... plus the China Lion will also breed their own chips... there will be lots of competition and Intel is just too old to survive in the new era...
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email