Intel CEO Fast-Tracks Turnaround Bid With $20 Billion Investment Plan -- Update
By Aaron Tilley
Intel Corp. will more aggressively outsource some chip
production while doubling down on its own manufacturing with a
roughly $20 billion spending commitment for new plants, as Chief
Executive Pat Gelsinger fast-tracks efforts to revitalize America's
most iconic semiconductor company.
Mr. Gelsinger said Tuesday that Intel would rely more heavily on
third-party chip-making partners, including for some of its most
cutting-edge processors, starting in 2023.
But the new CEO, on the job a little more than a month, said
Intel wasn't abandoning its historic roots of being both a designer
and manufacturer of chips and would retain most production
in-house. The company, he said, also is renewing efforts to make
chips for others.
To underpin those ambitions, Intel plans to build two new chip
factories, commonly referred to as fabs, at existing facilities in
Arizona, Mr. Gelsinger said, with production due to start there in
2024. The company also said that within the year it would detail
further expansion plans in the U.S., Europe and elsewhere.
"We are back with a vengeance," Mr. Gelsinger said in an
Concerns about the robustness of the U.S. chip industry have
grown in Washington over the past couple of years as semiconductor
production shifted to Asia. Those worries intensified in recent
months amid a global component shortage. Car makers, in particular,
have felt the impact, causing them to idle some of their production
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. Chip makers broadly
welcomed the president's move, though warned there was no quick fix
to current supply bottlenecks. The U.S. semiconductor industry has
argued for years that the federal government hasn't sufficiently
supported what it says are critical chip-building capacities,
including financial inducements to build plants.
The U.S. now accounts for about 12% of global
semiconductor-manufacturing capacity, down from 37% in 1990 as
other countries have subsidized growth of their chip makers,
according to the Semiconductor Industry Association, a trade
"Every industry needs more semi capabilities," Mr. Gelsinger
said. Demand for chips has been strong as almost all parts of the
global economy become more digital, he said, with the trend only
accelerated by the Covid-19 pandemic.
Intel said under its enhanced outsourcing plan, it would ask
others -- including Taiwan Semiconductor Manufacturing Co. and
Samsung Electronics Co. -- to make crucial components of its chips.
The move takes advantage of a design approach Intel and others have
embraced: making semiconductors in a Lego-brick-like manner. Mr.
Gelsinger said the company would, in some cases, outsource the core
components of its central processors, the brain of a computer.
Mr. Gelsinger, who rejoined Intel after serving as the company's
chief technology officer during a prior stint, signaled even before
formally taking the reins at Intel that he would rely more on
third-party vendors to make the company's chips.
The company also said it would combine its chip-production
activities in the U.S. and Europe into a stand-alone division
called Intel Foundry Services, to be run by industry veteran
Randhir Thakur, who had led Intel's supply-chain operations. IFS
will produce Intel-designed chips and those using other
Intel has pushed to build chips for others before, but failed to
attract significant business. Mr. Gelsinger said Intel was more
focused this time and had already attracted "extraordinary
interest" from companies and governments in what it was
Intel, the largest U.S. chip maker by sales, had fallen out of
favor with investors after a series of missteps. Graphics-chip
maker Nvidia Corp. last year overtook Intel as the largest U.S.
chip company by market valuation. Nvidia's stock more than doubled
last year amid pandemic-fueled sales of laptops and videogames.
Intel's shares retreated 17%, though the stock has rallied roughly
20% since Intel in January said Mr. Gelsinger would become CEO. The
stock slipped 3.3% to $63.48 in Tuesday trading before it disclosed
its new strategy.
Intel's woes date back several years. The company has fallen
behind Asian rivals after repeated manufacturing missteps. Apple
Inc. also dropped Intel as a chip supplier for some Mac computers,
and the chip maker has suffered market-share losses and faced a
push by activist investor Third Point LLC for strategic changes.
The company in January said it was parting ways with CEO Bob Swan
and hiring Mr. Gelsinger as his successor.
Intel's latest stumbles were tied to its so called 7-nanometer
semiconductors, a term that loosely describes performance and
refers to how densely transistors are packed on a chip. Mr.
Gelsinger said development of that chip was progressing well after
the company modified its production process. The company aims to
enter the final design stage for the chip this year.
Intel also said it had struck a research-collaboration agreement
with International Business Machines Corp. around elements of chip
design in a bid to speed semiconductor-manufacturing
Write to Aaron Tilley at firstname.lastname@example.org
(END) Dow Jones Newswires
March 23, 2021 17:22 ET (21:22 GMT)
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