Intel (INTC), the semiconductor manufacturer announced that they had finalized plans to invest $20 billion to set up chip-making plants on American soil. According to Pat Gelsinger, the new CEO of Intel, investment is a part of its turnaround strategy aimed. To consolidate its position as the leader of the global semiconductor industry. Additionally, According to several industry experts, this is a claim that has been eroded for many years.
Stock Price Surges
In a statement, Gelsinger said, “We are setting a course for a new era of innovation and also product leadership at Intel.” The reaction in the stock markets was immediate with the company’s stock rising over 6% in Tuesday’s after-hours trading. The share prices of AMD, a leading competitor fell by 2% while the stock of Taiwan Semiconductor Manufacturing Company dropped by 3.9%, the next day, as reported by Bloomberg Quint.
It may be recalled that Intel appointed its new CEO at a time when the company was facing severe threats. Including intense competition from Apple and also a demand for change by an activist shareholder. Delays in the production of next-generation semiconductors. This has resulted in Intel losing market share, particularly to aggressive Asian companies like Samsung and TSMC. Even as the company is still trying to get its 7-nanometer next-gen chip ready, these Asian companies have forged. Ahead with even smaller and also faster processors. Intel’s performance on the stock market has also come under pressure. Its stock prices have grown only by 19% compared to 1145 clocked by the PHLX semiconductor index, according to CNN.
Strategy to Bounce Back
Intel bouncing back relies on what it terms as IDM2.0, a transformation of its model. For integrated device manufacturing that envisages both the design of semiconductors and also their production. To prevent production delays and manufacturing issues that have plagued it in the past, Intel plans to increase its use of contract manufacturers. That it had refrained from doing for its advanced microprocessors, unlike many of its competitors. According to the statement issued by the company, Intel will tread on this path from 2023 to manufacture products at “the core of Intel’s computing offerings for both client and also data center segments.” “This will provide the increased flexibility and also scale needed. To optimize Intel’s roadmaps for cost, performance, schedule, and supply,” the statement added.
Despite the announcement for using contract manufacturers. Intel confirmed that it would stick with its avowed policy of manufacturing most of its semiconductors in-house. It announced an investment of $20 billion for adding two new chip manufacturing units to its campus in Arizona. This, according to the company, would result in the creation of “over 3,000 permanent high-tech, high-wage jobs; over 3,000 construction jobs; and also approximately 15,000 local long-term jobs.” The company also plans to launch Intel Foundry Services. A new business unit that would manufacture semiconductors designed by other companies.
This move by Intel comes at a time when there is a global shortage of chips that has impacted a wide assortment of companies ranging from car to video game manufacturers. The fresh capacity addition to Intel’s Arizona campus would also cater to this new business. According to the company, this initiative has already been received with enthusiasm and also strong support from the industry.