By Robert Wall
Behind Intel Corp.'s multibillion-dollar revival plan is a
growing view among tech executives that booming demand for computer
chips will continue beyond the pandemic.
Intel on Tuesday committed to a record $19 billion to $20
billion in capital expenditures this year, or about 45% above the
company's average annual capital expenditures over the past five
Taiwan Semiconductor Manufacturing Co., 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%
"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 Pat Gelsinger said Tuesday as
he rolled out his turnaround plan for the company. The embrace of
more digital tools fueling that demand, he said, were only
accelerated by the pandemic.
Microsoft Corp. CEO Satya Nadella, 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
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.
Graphic-chips rival Nvidia Corp., 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, Apple Inc. and Qualcomm
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 Samsung Electronics
Co. is considering a $17 billion investment in U.S. 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 Gaurav
Gupta, 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 C.J. Muse 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 to 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
Citi analysts, in a note Wednesday, said TSMC may need to make
changes in how it operates, including new safeguards around its
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 immediately respond to a request for
Write to Robert Wall at firstname.lastname@example.org
(END) Dow Jones Newswires
March 24, 2021 16:18 ET (20:18 GMT)
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