Intel to invest $20B for Ohio chip hub; project 'critical' to automakers

Technology giant Intel Corp. plans to spend $20 billion on a massive chipmaking hub on the outskirts of Columbus, Ohio, which the company expects to grow to be the world’s biggest silicon-manufacturing site.

The chipmaker on Friday said it will begin construction of two fabrication plants on a 1,000-acre site in New Albany, which it expects to be operational by 2025. CEO Pat Gelsinger said the Santa Clara, Calif.-based company will use the location as a hub to research, develop and manufacture its most advanced chips and will have the option to expand to 2,000 acres and up to eight fabs.

Gelsinger, in an interview Friday on CNBC, said the project is critical to the auto industry.

"When you think of the auto industry, you're going to see us have more to say with the auto industry leaders as they are looking to us and others to build up and satisfy their demands," Gelsinger said.

"Because as we've seen, the economic impact of not having enough chips to meet the growth of that  (demand) has been inflationary and job impacting, so this is critical to support that industry, which is already very present in the heartland, and now the silicon heartland."

Intel has been investing billions of dollars in automotive technologies over the last few years.

The ongoing global microchip shortage has afflicted industries globally including the auto industry. President Joe Biden's administration wants Congress to approve $52 billion to expand U.S. semiconductor manufacturing.

Biden and Gelsinger were scheduled to speak together about the Ohio news from the White House later Friday morning.

While the new chip hub will address long-term supply challenges, it won’t provide immediate relief for the auto and other industries that have faced a chronic microchip shortage since early 2021 and will likely stretch deep into 2022, according to analysts.

Commerce Secretary Gina Raimondo applauded the Intel announcement.
 
“This investment is a big win for Intel, for American manufacturing and for American consumers who can look forward to lower prices as we bring home production of the semiconductors that keep our economy running,” Raimondo said in a statement Friday.
 
Raimondo called for Congress to “move swiftly” to pass the billions in funding for domestic semiconductor production. She also will deliver remarks Friday alongside the president.

“Other countries aren’t waiting,” she said, “and every day we wait, we fall further behind.”

U.S. Sen. Rob Portman, R-Ohio,  called the plan a “historic investment” for Ohio and the U.S. The senator said Congress is working in a bipartisan fashion to pass legislation such as the CHIPS Act and the broader U.S. Innovation and Competition Act.

“This legislation would improve our nation’s competitiveness in technology and communications, foreign relations and national security, domestic manufacturing, education, trade and other important issues,” Portman said in a statement.

Intel last month said it plans to conduct a public stock offering for its Mobileye automotive technology unit.

Mobileye, an Israeli company that Intel acquired for about $15 billion five years ago, could be valued at more than $50 billion during its U.S. IPO in mid-2022, a source previously told Reuters.

Intel’s CEO has been vocal about the need to build more chip factories in the U.S. and Europe, areas where manufacturing of the vital electronic components has declined sharply.

Gelsinger has argued that a rebalancing of production is needed to reverse an increasing concentration in East Asia.

He has pointed to the pandemic-induced supply chain crunch and increasing geopolitical tension between China and the U.S. as evidence that Western governments need to find cash to persuade chipmakers to relocate.

Adding Ohio to its roster of chip outposts, not traditionally an area associated with the technology industry, adds to the greater geographical diversity that Gelsinger has championed. Intel is also looking at sites in Germany, Italy and France for new factories, test and assembly plants, and research and design centers, Bloomberg has reported.

Putting some of Intel’s billions of dollars in capital expenditure to work in a new location for the company -- it currently has plants in Oregon, Arizona and New Mexico -- may help bolster Gelsinger’s appeal for taxpayer money. That in turn will help cushion some of the drag on profitability caused by his ambitious plans to restore Intel’s manufacturing prowess and muscle in on the business of outsourced chip production, an area dominated by Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.

Intel’s CEO this year has budgeted a record amount of spending on new factories and equipment. But, highlighting the massive and growing cost of state-of-the-art chipmaking, TSMC and Samsung are planning to raise the stakes even higher.

TSMC has set aside more than $40 billion for capital expenditures this year. That compares with Intel’s plan to spend up to $28 billion. South Korea’s Samsung will likely announce 2020 plans on Jan. 27 when it reports quarterly earnings. Analysts, on average, predict a companywide budget of about $36 billion.

Bloomberg and Reuters contributed to this report.