Semiconductor giant Intel on Wednesday, March 20, announced plans to invest a substantial $100 billion across several US states, with the goal of bolstering its manufacturing capabilities. This move comes as the company secures significant federal support, including $19.5 billion in grants and loans, alongside a pursuit of $25 billion in tax breaks, reported news agency Reuters.
The focal point of Intel's expansive strategy involves repurposing vacant lands near Columbus, Ohio, into what CEO Pat Gelsinger describes as "the largest AI chip manufacturing site in the world," set to commence operations by 2027. This initiative received a boost from the US government, which has allocated federal funds to Intel under the CHIPS Act.
In addition to the Ohio project, Intel plans to renovate existing sites in New Mexico and Oregon, while also expanding operations in Arizona. This move aligns with President Joe Biden's agenda to fortify advanced semiconductor manufacturing within the United States.
The injection of federal funds, catalysed by Biden's semiconductor revitalisation plan, aims to rejuvenate Intel's business model, which has faced challenges in maintaining its manufacturing edge over the past decade.
Gelsinger had announced a plan in 2021 to reclaim Intel position as an industry leader, but to make the plan profitable he said he requires government support.
The company held a dominant position for many years as a global leader in producing semiconductors, which it sold at premium rates. Profits from these sales were consistently reinvested into further research and development, allowing Intel to maintain a competitive edge in the industry.
However, during the 2010s, Intel's manufacturing superiority began to diminish. This decline led to a significant drop in profit margins as the company resorted to reducing prices in order to retain market share, even with products that were perceived as inferior to competitors'.
With government assistance in hand, Intel is now poised to execute its investment strategy. Gelsinger notes that around 30% of the $100 billion plan will be allocated to construction expenses, with the remaining 70% dedicated to acquiring chipmaking tools from industry leaders, reported Reuters.
While Intel aims to bring the Ohio facility online by 2027 or 2028, Gelsinger acknowledges potential market fluctuations that could impact the timeline. Despite the federal backing, Intel recognises the urgency of regaining competitiveness against its Taiwanese and Korean rivals.
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