Intel plans major fab investments in AZ

Intel plans to invest about $20 billion to build two new fab facilities in Arizona, bolstering U.S. jobs and the domestic semiconductor supply.

Pat Gelsinger, Intel’s CEO, discussed the fab investments and Intel’s strategy in an online financial and business update on the company. He said that four factors — cloud, connectivity, artificial intelligence and the “intelligent edge” — are driving chip demand, and that Intel’s depth and breadth in software, silicon, platforms, packaging and processes, plus its manufacturing capability, differentiates the company in the current technology transition period.

“The world will move from system-on-a-chip to system-on-package, and Intel’s unquestioned leadership in packaging technologies becomes even more valuable,” he said. “Being able to expertly construct the best products using the best technologies, is a critical differentiator for us and one that delivers enormous value for our customers.”

Gelsinger said that Intel’s internal integrated manufacturing model has been foundational to its success, and that Intel will continue to build the majority of its products in Intel fabs — but it plans to also expand its use of third-party foundry capacity across its portfolio. Intel already uses third-party foundries to deliver chips for communications, connectivity and graphics, he said, and its engagement with companies such as TSMC, Samsung, Global Foundries and UMC will grow in size and scope to deliver a combination of cost, performance, supply and schedule for semiconductor production.

He said that amid desire to see a “more geographically balanced manufacturing capacity,” Intel will be putting in its first large-scale foundry operation in Arizona, at its Ocotillo campus in Chandler, AZ, with planning and construction starting immediately. The investment will support more than 3,000 “high-tech, high wage” jobs, more than 3,000 constructions jobs and around 15,000 long-terms jobs in Arizona, the company said, adding that it has worked with the state of Arizona and the Biden administration on incentives to spur the investments.

“We are committed to advancing U.S. competitiveness for the future of the country,” Gelsinger said.

Intel also announced a partnership with IBM to develop cutting-edge packaging and process technologies for future chips; IBM Chairman and CEO Arvind Krishna said during the online event that his company understands the importance of developing a more secure semiconductor supply chain and supports U.S. government efforts to encourage investment in this area. Gelsinger also noted the importance of the domestic supply chain but made a point that the fab capacity will be used for commercial customers as well as government-specific orders.

Despite the enthusiasm for the path forward, Gelsinger nonetheless cautioned that he expects 2021 to be a transitional year for Intel, and said that the company still faces industry-wide challenges including shortages of critical third-party components such as substrate, as well as uncertainty over U.S. Department of Commerce Entity List export restrictions.

During a Q&A session, Gelsinger was asked about previous foundry efforts in the U.S. that fizzled, and why this time is different.

“The market is really different this time,” he responded, noting the overall market demand as well as the strong interest from U.S. and E.U. governments in having a domestic chip supply. He also said that the previous effort was “somewhat weak” and that while the company learned a lot, Intel had not fully thrown itself behind the effort. This time, he said, “we’re going after this much more aggressively.”

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