Chipmaker Intel is spinning out a new business unit dedicated to manufacturing semiconductors for other companies in a revamp designed to meet the global growing demand for chips. But critics doubt how new the strategy really is.

Intel Foundry Services will focus on supplying chip capacity in the US and Europe. It will be led by current Intel senior vice president Randhir Thakur and give customers access to Intel’s intellectual property portfolio, which includes x86 cores and ARM and RISC-V designs.

The US multinational also said it will build two new fabrication plants in Arizona costing $20bn to help keep pace with soaring demand for semiconductors.

A perfect storm of Covid-19, severe weather, geopolitical tensions and a factory fire has created a global chip shortage that has left automakers and consumer electronics firms scrambling for silicon to power their machines.

It is unclear whether Intel’s new foundries will be completed in time to address this current shortage.

Intel is an integrated device manufacturer (IDM), which means it both designs and manufactures integrated circuits. Other players in the chip industry, such as Qualcomm and Nvidia, create semiconductor designs but outsource manufacturing to separate companies with fabrication plants.

Intel Foundry Services will aim to secure more business from such fabless companies. Taiwan Semiconductor Manufacturing Company (TSMC) is the largest company dedicated to producing chips

The announcements came as part of Intel’s IDM 2.0 strategy, given by the firm’s new CEO Pat Gelsinger. He said that Intel plans to continue manufacturing the majority of its chip products internally.

As of December 2020, the company had 10 assembly test manufacturing locations, six wafer fabrication sites and a Costa Rica site, according to GlobalData’s Intelligence Centre.

“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,” said Gelsinger. “IDM 2.0 is an elegant strategy that only Intel can deliver – and it’s a winning formula. We will use it to design the best products and manufacture them in the best way possible for every category we compete in.”

Intel Foundry Services received support from the chief executives of Microsoft and IBM, but some analysts struck a more cautious tone.

“Critics would argue that elements of this strategy aren’t new,” said Geoff Blaber, CEO at CCS Insight. “Intel has talked about opening its manufacturing capability to customers for years but failed to make any considerable progress.

“Gelsinger needs to prove that this time it’s different, that it fulfils a customer need and that it can sit comfortably alongside Intel’s own manufacturing requirements.”

Intel also announced it will partner with IBM to improve chip logic and packaging.

Intel said its Arizona fabrication plants are expected to create more than 3,000 permanent “high-tech, high-wage jobs”.

The build will create 3,000 construction jobs while Intel forecasts the associated local ecosystem to create 15,000 jobs in the area.

In February President Joe Biden signed an executive order to encourage domestic chip production. The majority currently takes place in Taiwan and South Korea, with China making up ground.

“We are excited to be partnering with the state of Arizona and the Biden administration on incentives that spur this type of domestic investment,” said Gelsinger.

Intel added that it is considering additional foundry expansions in other US locations and in Europe “within the year”.

“TSMC has become the clear leader in advanced semiconductor manufacturing built off the vast scale and growth of the smartphone industry,” added Blaber.

“Intel is adapting its model and acknowledging competitors strengths yet doubling down on the areas where it leads in scale and innovation, such as its 3d packaging technology. This is a new pragmatic Intel born of necessity.”


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