Intel is preparing to spend 100 billion dollars in American states

Intel plans to spend $100 billion to build and expand factories in four U.S. states after securing $19.5 billion in federal grants and loans — and hopes to secure $25 billion in tax breaks.

The centerpiece of Intel’s five-year spending plan is to transform vacant fields near Columbus, Ohio, into the “world’s largest AI chip manufacturing site” starting in 2027, CEO Pat Gelsinger told reporters Tuesday.

US government announced federal funds to Intel under the CHIPS Act on Wednesday.

Intel’s plan also would include the revival of sites in New Mexico and Oregon and expansion of operations in Arizona, where longtime rival Taiwan Semiconductor Manufacturing Co. is also building a giant factory and hopes to bring advanced semiconductor manufacturing back to the region. The money will come from pressure from President Joe Biden to bring. United States of america.

The funding provided by Biden’s plan for a broad chip manufacturing renaissance would greatly help Intel repair its wounded business model.

For decades, the company led the world in making the fastest and smallest semiconductors, selling them at a premium price and plowing the profits into more research and development to stay ahead of the pack.

But Intel lost that manufacturing lead to TSMC in the 2010s, and its profit margins declined as it cut prices to maintain market share with inferior products.

Gelsinger announced a plan to return Intel to the No. 1 spot in 2021, but he has said he will need government support to make the plan profitable.

With that help out, now is the time for Intel to spend.

Gelsinger said about 30% of the $100 billion plan would be spent on construction costs such as labor, piping and concrete. The remaining amount will be spent on purchasing chip making equipment from companies like ASML, Tokyo Electron, Applied Materials and KLA.

That equipment will help bring the Ohio site online by 2027 or 2028, though Gelsinger warned that timeline could slip if the chip market declines. Beyond grants and loans, Intel plans to finance most of the purchase with its existing cash flow.

“It will still take three to five years for Intel to become a serious player in the foundry market for cutting-edge chips,” said Kinnagai Chan, an analyst at Summit Insights.

However, he warned that Intel would need more investment before it could overtake TSMC, and said the Taiwanese firm could remain the leader for “some time to come.”

Gelsinger had previously said that re-establishing the US as a leader in semiconductor manufacturing would require a second round of US funding for chip factories, which he reiterated on Tuesday.

“It took us more than three decades to lose this industry. It’s not going to come back in three to five years of CHIPS Act funding”, said Gelsinger, who called the low-interest rate funding “smart capital.”

But even with federal support, Intel needs to show it can compete with its Taiwanese and Korean rivals soon, said Ben Bajarin, CEO of analyst firm Creative Strategies.

“It will be important to know how long Intel needs ‘smart capital’ before it can stand on its own,” Bajarin said.

Overall, however, Intel will be the most important chipmaker to U.S. interests, even if rivals are building in the country, said Jimmy Goodrich, semiconductor export and technology adviser at Rand Corp.

He added, “Only Intel has the workforce, technology and supply chain that is largely US-centric. So, while what TSMC and Samsung are doing here is important and should be welcomed, a strong domestic team It is also important to be.”