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Tech company Intel focused its production capacity to develop its own products, such as the company’s flagship processing centers, chips or semiconductors, servers and other technology components.
However, it plans to invest $20 billion through 2024 to build two chip facilities in Arizona. The investment comes along with a strategic shift in the American giant’s business model, as it focuses on chip foundries for other companies.
The chip foundry market is led by Taiwan Semiconductor Manufacturing Co. which, since its creation in 1987, has created chips and technology components for all kinds of companies, including Intel.
Intel’s bet is in sync with the U.S. government’s bid to boost its own technology production. Secretary of Commerce Gina Raimondo highlighted Intel’s investment in Arizona in a press release.
“Today, we celebrate American innovation and job creation. Intel’s investment will help to preserve U.S. technology innovation and leadership, strengthen U.S. economic and national security, and protect and grow thousands of high-tech, high-wage American jobs,” Raimondo’s statement added.
The company is taking advantage of the severe chip shortage affecting technology and automotive production globally and in turn poses a new challenge for China, considering that leaders in the supply chain of semiconductors and high-capacity technology components, such as Intel, TSMC, FoxConn and Samsung, among others, are restricted from supplying Huawei and other Chinese giants.
Global semiconductor crisis
Technological advancement, the coronavirus pandemic (COVID-19) and automotive electronics changed the course of chip production. The demand for smaller, high-performance semiconductors has forced the giants TMSC, Samsung and now Intel to invest millions of dollars in the adaptation of new plants.
On the other hand, the trade war with China has forced several of the technology component manufacturers to relocate their factories, which implies additional costs that are reflected in product delivery times.
The crisis has affected General Motors, Ford and Volkswagen, and could last several quarters or even next year, according to a Bloomberg study.
Added to this is the fire at the factory of Renesas, the Japanese chip manufacturer that dominates close to 20% of the microcomputer market, which controls automobiles and heavy machinery.
China, for its part, announced a strong investment in semiconductor production to face the sanctions imposed by the United States. But a lack of experience and a lack of proprietary investment technology puts China’s plans on an even longer timeline. With chip production concentrated in the Indo-Pacific, the region takes on an economic and geopolitical value of much relevance.
The stability of the region, as well as a free and open Indo-Pacific, secures the supply chain for semiconductors and other technology components. Consequently, Intel’s investment at home eases the future hopes of American companies and the White House, which also hopes to cooperate with the company for the production of defense chips.
Pat Gelsinger, the CEO challenging China and transparent Asian competitors
Intel CEO Pat Gelsinger marks an important change for the company with the so-called Intel’s IDM 2.0 Strategy, which for years has focused on the production of components for its own use and now aims at an expansion in the market.
This is a business model that will allow the American company to compete against TSMC and Samsung in the chip foundry market and will be done under Intel Foundry Services, a unit dedicated solely to that objective.
Although Intel’s developments have marked a strong leadership and scientific capability, they are still far from the high-performance production of TSMC, whose 3-nanometer technology will enter mass production by the second half of 2022. The American company, on the other hand, has delayed its own more advanced 7-nanometer production technology until at least the end of 2022.
Camilo Bello is a consultant focused on Asia Pacific studies and has experience in strategic management. He has studied law in Colombia and is currently pursuing studies in language and history at National Taiwan Normal University. He has collaborated with Students for Freedom in Hong Kong and Taiwan // Camilo es consultor enfocado en estudios de Asia Pacífico y experiencia en gestión estratégica. Cuenta con estudios en Derecho en Colombia y actualmente se encuentra realizando estudios en lenguaje e historia en National Taiwan Normal University. Colaborador de Estudiantes por la Libertad en Hong Kong y Taiwán