US chip titan Intel said Tuesday it will invest $20 billion in building two new plants in Arizona as part of a plan to ramp up production in the United States and Europe.
The move comes as a global chip shortage has countries and companies in those regions looking to reduce reliance on plants in Asia for semiconductors, which are used in a growing array of products such as cars.
“Intel’s investment will help to preserve US technology innovation and leadership, strengthen US economic and national security, and protect and grow thousands of high-tech, high-wage American jobs,” Secretary of Commerce Gina Raimondo said in a statement.
Intel chief executive Pat Gelsinger announced the investment during a webcast about the company’s strategy, as it faces pressure to come up with ways to fend off fierce competition.
“Intel is the only company with the depth and breadth of software, silicon and platforms, packaging, and process with at-scale manufacturing customers can depend on for their next-generation innovations,” Gelsinger said.
He stressed that Intel intends to continue doing most of its chip making at its own plants while also building on relationships with third-party manufacturers for some of its product line.
As part of a vision to be a major producer of chips in the United States and Europe, Intel is establishing a new manufacturing unit called “Foundry Services,” according to the Silicon Valley company.
“Gelsinger’s disclosure gave me many reasons to believe Intel is ‘back’ if the company can execute its plans,” said analyst Patrick Moorhead of Moor Insights and Strategy.
“The $20 billion doubling down of manufacturing is bold.”
Moorhead expected more investment by Intel given the need expressed by the United States and European governments for on-shore, leading-edge chip making.
“This isn’t Intel hedging its manufacturing bets – it looks to me as if the company is all in,” the analyst said of the tech giant’s plan.
Intel said it took in $20 billion in revenue during the final quarter of last year, little changed from a year earlier, amid robust sales of personal computers.
The company reported net income of $5.9 billion in the quarter, down a billion dollars from the same period a year earlier.
Intel early this year approved an increased cash dividend of $1.39 per share in what may have been a move to placate activist investor Dan Loeb of Third Point, who has called on Intel to bolster its weakening position in the chip market.
The hedge fund has told the company it should consider outsourcing its manufacturing operations to keep pace with rivals in the sector such as Taiwan-based TSMC and South Korean giant Samsung.
While Intel remains one of the world’s leading chip companies, it has lagged behind rivals in the fast-growing segment of mobile devices, and its chips are being phased out by Apple, which is developing its own microprocessors for its Mac computers.