Intel boosts production in response to chip crisis

26 March 2021

Chip maker Intel is boosting manufacturing capacity to meet demand for semiconductors.

Intel is investing $20bn in two new factories in Arizona in response to “increasing requirements”.  

The move follows overwhelming demand on the global chip supply chain, which has caused delays in automotive production, and prompted the EU to aim to double chip production by 2030.

The expansion plans include building up use of existing third-party foundries, which currently manufacture Intel products, including components for communications, connectivity, and chipsets.

“This will provide the increased flexibility and scale needed to optimise Intel’s roadmaps for cost, performance, schedule and supply”, the company said.

Pat Gelsinger, Intel CEO, told the Financial Times that Intel’s “strategic use of outside foundries is an under-appreciated fact”. 

Gelsinger said “co-opetition” involved partnering with and outsourcing to traditional rivals, including the Taiwan Semiconductor Manufacturing Company and Samsung.

Gelsinger said Asia had 80% market share for the foundry industry, with the US on 15% and Europe with 5%.

He said: “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.

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

Intel has also launched a standalone business, Intel Foundry Services (IFS), providing manufacturing services located in the US and Europe.

“IFS will be differentiated from other foundry offerings with a combination of leading-edge process technology and packaging, committed capacity in the U.S. and Europe,” said Intel. 

Ian Nethercot, supply chain director at Probrand, said: ‘‘The global chip shortage has been in existence for over 18 months now. Since the Covid outbreak, this shortage has escalated to a new all-time high … and naturally led to unprecedented levels of demand across the IT industry in devices such as laptops, PCs tablets and smartphones.

“This increase in demand has drained the level of component supply available to manufacturers. Additional factors include the current raw material shortage and slower production processes due to Covid restrictions.”

Nethercot recommended firms mitigate shortages through forecasting ahead to 2022, safeguarding by procuring additional supplies, and maintaining consistent and clear communication with suppliers.

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