Intel ups the ante, planning $20 billion for chip factories in Arizona

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Intel Corp (NASDAQ: INTC ) will vastly expand its advanced chip manufacturing capacity, the company’s new chief executive said, announcing plans to spend up to $20 billion to build two factories in Arizona and open installations to external clients.

The move announced Tuesday by Pat Gelsinger seeks to restore Intel’s reputation after manufacturing delays sent shares tumbling last year. The strategy directly challenges the world’s other two companies that can make the most advanced chips, Taiwan’s Semiconductor Manufacturing Co Ltd (TSMC) and Korea’s Samsung Electronics (KS: 005930 ) Co Ltd.

In addition, it seeks to tilt the technological balance of power toward the United States and Europe, when leaders on both continents worry about the risks of a concentration of chip manufacturing in Taiwan given tensions with China.

Intel shares jumped 6.3% after the company revealed its new strategy and financial guidance for all of 2021. Some investors, such as Third Point LLC, had earlier urged Intel to consider spinning off its pricey operations. chip manufacturing.

Intel said it expects $72 billion in revenue and adjusted earnings per share of $4.55, compared with analyst estimates of $72.9 billion and $4.77 per share, according to Refinitiv data. The company said it expects to spend between $19 billion and $20 billion in capital expenditures.

Intel is one of the few remaining semiconductor companies that designs and manufactures its own chips. Rival chip designers like Qualcomm Inc (NASDAQ: QCOM ) and Apple Inc (NASDAQ: AAPL ) rely on contract manufacturers.

In an interview with Reuters, Gelsinger said Intel has “completely resolved” its problems with its latest manufacturing technology and that “all systems are working” on chips by 2023. It now plans a massive manufacturing expansion.

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The plan includes $20 billion for two new factories at an existing campus in Chandler, Arizona, and later elsewhere in the United States and Europe, Gelsinger said.

Intel will use those facilities to make its own chips, but it will also open them up to outside customers in what’s called a “foundry” business model in the chip industry.

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