Chips built in Ohio won’t just reduce supply chain pressures but will also bolster US national security while bringing more tech jobs to the region, said Intel’s CEO.

Intel will invest $20 billion to build two computer chip factories on a 1,000-acre site in Licking County, Ohio, US.
Intel will invest $20 billion to build two computer chip factories on a 1,000-acre site in Licking County, Ohio, US. (AP)

Chipmaker Intel has said it will invest $20 billion to build a new factory in Ohio, an attempt to help alleviate a global shortage of chips powering everything from phones to cars to home appliances while also signalling the giant company’s commitment to manufacturing crucial technology products in the US.

Intel said two planned factories, or fabs, will support its own line of processors, as well as its new “foundry” business, which will build chips designed by other firms. 

Existing chip foundries turn out a vast number of custom-designed chips, mostly in Asia. The business is currently dominated by Taiwan Semiconductor Manufacturing Co., or TSMC.

The future production site aims to meet multiple needs, Intel CEO Patrick Gelsinger said during a White House event. Chips built there won’t just reduce supply chain pressures, he said, but will also bolster US national security while bringing more tech jobs to the region.

“A semiconductor factory is not like other factories,” said Gelsinger, a former Intel executive who returned to the company as CEO in 2021.

“It’s more like a small city supporting a vibrant community of services, suppliers and ancillary businesses. You can think about this as a magnet for the entire tech industry.”

READ MORE: Apple slashes iPad production as chip shortage bites

Chips for high-end devices

President Joe Biden used Intel's Ohio announcement to push a $52 billion bill awaiting House approval that would invest in the chip sector and help ensure more production occurs in the US.

Construction is expected to begin this year, with production coming online at the end of 2025. The company is also investing an additional $100 million for an education pipeline to help provide jobs for the facility. Total investment could top $100 billion over the decade, with six additional factories, Gelsinger said.

Intel said one of the products it will make in Ohio is the Intel 18A, “among the most advanced chips ever made,” according to Forrester analyst Glenn O’Donnell. Those will likely be used in the high-end computers that are popular with video game enthusiasts and needed for the data centers run by tech giants like Amazon and Microsoft.

But making more computer chips in the US won’t entirely protect the industry from supply chain disruptions and shortages because the chips still will be sent to Asia for assembling and packaging, said Nina Turner, a research analyst at IDC.

After years of heavy reliance on Asia for the production of computer chips, vulnerability to shortages of the crucial components was exposed in the US and Europe as they began to emerge economically from the pandemic.

READ MORE: Carmakers warn chip shortage slows recovery

Causing vulnerability of defence systems

The US share of the worldwide chip manufacturing market has declined from 37 percent in 1990 to 12 percent today, according to the Semiconductor Industry Association, and shortages have become a potential risk.

Shortages of chips have crimped the ability of US automakers to produce vehicles, and last year, General Motors was unseated by Toyota as the nation’s top-selling automaker for the first time.

Several chipmakers last year signaled an interest in expanding their American operations if the US government is able to make it easier to build chip plants. Samsung said in November it plans to build a $17 billion factory outside of Austin, Texas.

As Biden alluded to, lawmakers have been urging House and Senate leaders to fully fund a law meant to address the semiconductor chip shortage. They want Congress to fully fund the $52 billion CHIPS for America Act, allowing for stateside investment in semiconductor factories.

Not only has the chip shortage disrupted the US economy, it is also creating a vulnerability in the country’s defence system, since eight of every 10 chips are produced in Asia, lawmakers say.

Intel also has plants in Ireland, Israel, Vietnam and China.

Intel is the No. 2 semiconductor manufacturer globally, with $73.1 billion in revenue last year, behind South Korean world leader Samsung Electronics with $76 billion, according to market analysis from Gartner Inc.

READ MORE: Global chip shortage to hit smartphone market next

Source: AP