Report: German State of Bavaria May Partner With Intel to Build Chip Factory

The EU and Intel have been making eyes at each other for a few months now. Intel is interested in expanding its foundry operations and establishing itself as a competitor for TSMC and Samsung Foundry. The European Union, for its part, has been frustrated by the impact of the semiconductor shortage on the automotive business.

According to Reuters, the German state of Bavaria is in talks with Intel to potentially build a leading-edge fab. The fab would reportedly be built at a disused airbase in Penzing-Landsberg. This appears to be a reference to the Landsberg-Lech airbase, which was originally one of the first four airbases built in Germany.

The airbase was shut down in 2018, so it isn’t as if the site has sat fallow for decades. “I strongly support this,” said economy minister Hubert Aiwanger (BMW is headquartered in Bavaria). “The possible location of a large international semiconductor manufacturer in Bavaria is an outstanding opportunity.”

It’s not clear how true this is. The needs of auto manufacturers are being presented as the impetus behind this bill, but auto manufacturers have very little use for 7nm silicon. Tesla may be buying some high-end semi-custom chips from AMD to build out the game console inside the Tesla Model S Plaid, but most car companies use legacy chips built on older process nodes. Some components are still built on 90nm or higher, but even newer chips often use 28nm silicon. 28nm was the last major planar node before costs began to increase sharply. After 28nm, high-performance chip designs moved to FinFET. Some low-power silicon moved to GlobalFoundries 22FDX, but a lot of chips are still built on older nodes and equipment.

Most of the conversation around the idea of an Intel-European partnership has revolved around the idea of a leading-edge facility, but Reuters doesn’t actually use that phrase. EENewsEurope does, but they don’t say if they confirmed this independently. The only manufacturing that Reuters talks about is automotive manufacturing, and carmakers mostly rely on older silicon.

The big question for a European foundry is whether there’s enough demand for leading-edge processes in Europe to justify the expense. Intel could theoretically build a facility specializing in older foundry nodes and processes. There’s precedent for this. Foundry tool manufacturers began building new 200mm wafer tools in the last few years after a long hiatus. When AMD spun off GlobalFoundries, the new company added older manufacturing nodes it hadn’t previously supported to address the needs of the customers it wanted to court.

One can see a certain logic to both approaches. On the one hand, building new facilities for leading-edge customers gives Intel the opportunity to market/compete on its manufacturing prowess. This has historically been a strength for the company and its previous problems at 10nm have scarcely erased decades of culture that came before. If Intel wants to aggressively court leading-edge customers, it’s not going to build a foundry devoted to building archaic hardware.

On the other hand, there’s a certain logic in skating to where the puck is. Right now, the manufacturers most in need of relief are companies that buy older chips built on nodes Intel retired years or decades ago. These parts don’t carry huge margins and they don’t make headline news, but there’s something to be said for establishing a reputation for delivering well-built components at a reasonable price, especially when trying to break into a new market. When Intel decided to re-enter the GPU business, the company initially focused on low-end, relatively inexpensive hardware. The upmarket equipment intended to compete with Nvidia and AMD arrives later.

EENewsEurope isn’t necessarily wrong to assume Intel would build a leading-edge fab in Bavaria, because that’s the kind of facility Intel is historically known for building and its business model emphasizes remaining on the leading edge. But it’s the unique circumstances of the pandemic that have driven shortages to their current state, and Intel’s response to those unique circumstances could include a facility to build the types of chips companies rely on today.

Feature image: Intel Fab 42 in Arizona, the company’s latest facility. Any leading-edge foundry in Europe would improve on the 10nm lithography technology Intel has already deployed in facilities like this.