Intel’s plans to expand wafer production in Chengdu, China have come to a standstill after deliberations with the US government. The chipmaker had proposed using a factory in the region to manufacture silicon wafers to ease the semiconductor shortages that have been affecting virtually every industry over the past year and a half. The factory was expected to come online by the end of 2022 and help boost Team Blue’s production capacity. However, it looks like Pat and Co. will have to look at other venues to increase Intel’s chip output.
The Biden administration was quick to reject the plan over “security concerns”. While Intel is free to go ahead and increase production wherever it deems fit, it doesn’t want to miss out on the $52 billion funding accompanying the CHIPS Act. The proposal called the CHIPS Act has been stuck in the house for months, with Biden and the Commerce Secretary pitching it as a measure to counter China’s growing influence in the semiconductor industry.
In a statement, Intel remains open to other solutions that will also help us meet the high demand for semiconductors essential to innovation and the economy. Intel and the Biden administration share a goal to address the ongoing industrywide shortage of microchips, and we have explored a number of approaches with the U.S. government. Our focus is on the significant ongoing expansion of our existing semiconductor manufacturing operations and our plans to invest tens of billions of dollars in new wafer fabrication plants in the U.S. and Europe.
Intel
Intel didn’t directly comment on the news, but it is understood that the chipmaker has halted any plans to increase production in China for the time being. Regardless, if we’re being completely honest, shifting the supply chain in its entirety to US soil is simply not feasible, as indicated by the TSMC founder:
If you want to reestablish a complete semiconductor supply chain in the U.S., you will not find it as a possible task. Even after you spend hundreds of billions of dollars, you will still find the supply chain to be incomplete, and you will find that it will be a very high cost, much higher costs than what you currently have.In the past, companies in the U.S. or in Asia were growing and prospering thanks to globalization and free trade. Well, Tom, the world is not flat anymore. This is going to be a challenge for the Asian semiconductor industry, global semiconductor industry, including Intel.
Morris Chang, TSMC founder
At present, the US accounts for just 12% of the global semiconductor supply chain, down from 37% in the 1990s. Taiwan, followed by China and Korea handle the bulk of it due to cheap labor and other economic factors. The founder of TSMC (Morris Chang) has been adamant that moving the supply chain to America is financially undesirable, even if the US government spent a lot more than the presently allocated $52 billion.
He took a shot at Intel CEO Pat Gelsinger (indirectly), saying that people advocating for moving the semiconductor manufacturing to US soil are driven by self-interest. Gelsinger has been very vocal in his support for home-manufactured chips, pressurizing the US government for additional funding.
China is the largest consumer of semiconductors, serving as the assembly center for most of the world’s consumer electronics. This has been the case over the last 10 years or so. However, with the trade war intensifying, various sanctions and restrictions have forced manufacturers to rethink their strategy and potentially move production to more stable regions.
Intel is easily the most obvious benefactor of the CHIPS act. The chipmaker plans to expand production and open new plants in Arizona and across the US to boost production and increase job opportunities. However, none of these are slated to go online before 2023. This gives rival TSMC and Samsung plenty of time to establish an unassailable lead over the US-based chipmaker.
Source: Bloomberg
