After decades of trailing behind other chip makers like Samsung, Intel announced a plan to spend $20 billion to set up new manufacturing plants. The development came after the new Intel CEO Patrick Gelsinger revealed an ambitious plan of establishing multiple factories to scale up their production. One of the other key revelations was Intel’s vision to make chips for other companies it’s their foundry business. After the news broke the company’s shares increase about 5%.
Patrick Gelsinger, the recently appointed CEO of Intel, shared how the manufacturing giant has been struggling to produce 7nm chips. Once upon a time, in Silicon Valley, Intel was a giant in the $400+ billion chip manufacturing sector. The company earned its place by having the industry leading designs, and having its own top-of-the line futuristic factories to have customers like Apple in its tow.
However, in the past decade or so, the company ran into multiple issues when it missed deadlines for new technologies. The forementioned 7nm technology that Intel was going to produce was heavily delayed and soon Samsung and TSMC (Taiwan Semiconductor Manufacturing Company TSMC) surpassed Intel. While Samsung and TSMC continues pioneering its 7nm chips, Intel announced that the next-gen 7nm technology will be introduced in 2023.
This was not the first time Intel ran into hiccups in its plans. The company in 2011 started building its multibillion-dollar worth factory in Chandler, USA. The factory was also known as Fab 42 and was initially planned to serve as a manufacturing unit for 14nm chips. However, the project was soon put in the ice box and later in 2017; the factory started its operations.
In its presentation on Wednesday, Intel CEO acknowledged how Intel struggled in the production of 7nm chips. However, he assured that Intel will now be using a completely new redesigned process. The company will also take help from other component manufacturers till the time its new facilities are not ready.
The company also announced that it will be spending more than $20 billion to set up 2 new factories called Fabs in Arizona. The $20 billion spending makes sense as the company’s capital expenditures have been approximately $15 billion, year on year. The new factories would certainly help Intel in fighting its rivals, but it’s already fallen too far behind. Case in point, leading chip manufacturer TSMC who makes chips for AMD, will have its own 11 new fabs by the year 2024.
However, the company’s two new fabs does show how the company’s committed to produce its own chips and not lose its place. Analysts across the world have opined that Intel should sell its factories and outsource its chip manufacturing business to another chip manufacturer to gain access to the Taiwanese transistors that are leaps and bounds ahead of the competition.
The Intel CEO touched on this matter briefly and said that the company does plan to expand its outsourcing its effort. Given how the company’s putting a major chunk of its capital in establishing the two fabs, it can be assumed that the company will outsource components like GPUs and AI accelerators rather than server components.
Intel CEO also announced that the company will be coming together with the likes of IBM and more to develop cutting-edge transistors smaller than 7nm. The company revealed that IBM has already been working on transistors beyond 7nm in their research facilities and how Intel will bring the technology into mass-scale production.
Patrick in an interview acknowledged the company’s slips over the last few years and said, “Even though the stumble on 10 and seven was embarrassing for a company like ours, it’s fixed.”
It’s interesting how Intel made itself the pioneer company in tech manufacturing but couldn’t retain the place for long. With the new fabs, the company plans to come back in style by 2024 and the aforementioned IBM chips in 2025. But how the company continues to fight against strong rivals like AMD, it’s for the time to tell.
Meanwhile, after the announcement was done, shares of both TSMC and Samsung slipped. While other equipment makers such as Nikon Corp, Lasertec Corp surged as much as 13% and 7.5% respectively.