When new Intel CEO Pat Gelsinger joined the company last winter, the chipmaker was under growing pressure to give up on its beleaguered manufacturing arm and outsource advanced production to contract manufacturers overseas.
A month into the job, though, Gelsinger said Tuesday he is taking Intel in the opposite direction. The chipmaker will spend $20 billion to build two new factories in Arizona and will announce more later this year. Instead of outsourcing advanced production, Gelsinger said Intel wants to become a leading contract manufacturer itself.
Even as he outlined a bold – and expensive – new strategy, Gelsinger warned that Intel’s revenue will be down sharply this year. He forecast revenue of $72 billion, down 7.5% from 2020, due to shortages of key components.
Investors looked past that disappointing near-term outlook in favor of Gelsinger’s long-term ambitions. Shares jumped more than 7%, topping $68, while he spoke.
“Intel is back,” Gelsinger said. “The old Intel is now the new Intel as we look toward the future.”
Gelsinger spent the first 30 years of his career at Intel, joining at age 18 -- he skipped his last year of high school and earned a technical degree instead -- eventually becoming the company’s first chief technology officer. He left in 2009 and spent the past 8 years running cloud computing software company VMware.
During that time Intel suffered a string of manufacturing setbacks that cost it leadership in advanced chip technology. The company’s forthcoming 7-nanometer chips will arrive a year late in 2022 or 2023 – Intel’s third successive delay in new generations of microprocessors.
With Intel’s engineering apparently adrift, the company lured Gelsinger back last winter.
On Tuesday, Gelsinger said that Intel had been too timid in exploiting a new manufacturing technology, extreme ultraviolet lithography (EUV) for its 7nm chips. Intel has now embraced EUV, he said, and is back on track with those new production tools.
“We have righted this ship,” he said. “Seven-nanometer is on a good course.”
Even more significant Tuesday was Gelsinger’s plan to start making other companies’ chips in Intel’s own factories. Contract manufacturing, known in the chip industry as foundry work, is dominated by two Asian companies – Taiwan Semiconductor Manufacturing Co. and Samsung.
As those companies edged past Intel’s own production capabilities, Intel rivals NVIDIA, AMD and others have been able to use those Asian foundries to make chips more advanced than Intel’s. Apple, too, is shifting away from Intel processors in its Mac computers in favor of chips made in Taiwan.
Intel now wants a share of that business. Gelsinger said Tuesday that he will seek foundry contracts with Qualcomm, Apple and others.
Intel made a similar push in 2013 and it was a big flop. The company landed only one notable foundry customer, Altera, and ultimately bought that business itself.
“Our first efforts were somewhat weak. We learned a lot from them but we didn’t really throw ourselves behind them,” Gelsinger conceded Tuesday. “We are going after this much more aggressively.”
This time, Gelsinger said Intel will develop tools to make it easier for prospective customers to engineer chips suitable for Intel’s factories. He appointed a top executive, Randhir Thakur, to run Intel’s new foundry business and said Intel will set aside entire factories for foundry work.
“I’m committed to making this a huge success for Intel,” Gelsinger said.
“The current chip shortages and emphasis to have regional manufacturing for economic and security purposes demonstrate the value of having semiconductor manufacturing in-house,” veteran chip analyst Jim McGregor wrote on Forbes’ website Tuesday. He noted that Gelsinger has already lured a number of top engineers and executives back to Intel to restore the company’s engineering credentials.
Though based in California, Intel is Oregon’s largest corporate employer with 21,000 people working at its Washington County campuses. Oregon is Intel’s largest site anywhere and home to its manufacturing group.
The chipmaker is in the process of completing a multibillion-dollar expansion of its D1X research factory at its Ronler Acres campus near Hillsboro Stadium. It’s not clear that the company has room for more Oregon factories, and Gelsinger gave no hint Tuesday on where else in the U.S. it may build.
Under Gelsinger’s new strategy, Intel is seeking to capitalize on renewed political interest in nurturing a domestic semiconductor industry. He thanked the Biden administration and the state of Arizona for unspecified support and said Intel will announce more factories in Europe and the U.S. later this year.
Still, Gelsinger insisted the company’s new course isn’t dependent on subsidies or other government backing. He said Intel is committed to reviving its manufacturing prowess because that is its most fruitful path to rebuilding the business.
“We’re going first. We’re putting our chips on the table,” Gelsinger said.
-- Mike Rogoway | mrogoway@oregonian.com | twitter: @rogoway | 503-294-7699