The will-they-won’t-they between Intel and the EU over next-generation chip manufacturing has been resolved. Intel has announced it will spend up to €80 billion (approximately $95 billion in USD today) over the next decade on two new foundries in Europe. While €80 billion figure is an “up to,” it’s still an eye-popping figure in a relatively short period of time. New fabs are expensive, but they’re nowhere near that expensive.
Intel CEO Pat Gelsinger spoke at the IAA Mobility automotive event in Munich yesterday and opened his conversation with an obvious question: “Why is a semiconductor guy on stage at the biggest and most important mobility car show on earth?”
‘A Computer With Tires’
The above header is a direct quote from Gelsinger’s speech yesterday. The full quote is: “We need you and you need us. This is a symbiotic future that we are off innovating and supplying as the automobile becomes a computer with tires.”
It’s hard to argue the point. Automotive demand for semiconductors has risen dramatically in recent years, and while the auto market is still much smaller than PCs, mobile, or the consumer electronics space, it’s going to keep growing. Gelsinger believes the automobile TAM (Total Addressable Market) for semiconductors will rise from $50 billion today to $115 billion by 2030. He also expects automotive semiconductor demand to hit 11 percent of the total market by that year.
To put this investment in some perspective, Intel has reportedly spent €18 billion on its facilities in Ireland over the past 30 years, while it’s planning to spend €80 billion by the end of the decade. Even accounting for inflation, that’s a far larger sum over much less time.
According to Gelsinger, Intel wants to see 20 percent of global semiconductors produced in Europe by 2030, up from 9 percent today. The company is committing to expanding its facility at Leixlip as well as building a new mega fab in Europe at an initial price of €10 billion per fab for two fabs, then building up to the aforementioned €80 target by the end of the decade.
Even though he was speaking at an automotive event, Gelsinger rejected the idea that Intel would build fabs on older technologies. These are actually the components currently used the most in the vehicle manufacturing industry, but Intel’s CEO believes that may change in the future as the computational capability of cars increases.
The less charitable interpretation of this would be that Intel is going to build a fab in Europe that has precious little to do with what Europe actually needs or what European companies want to buy. The optimistic interpretation is that Gelsinger is right to be investing in the future of semiconductor manufacturing and that demand for these parts will appear in the future. The idea of investing during a downturn or a difficult product cycle is a classic Intel move — exactly the kind of strategy Andy Grove once championed.
This is also a maneuver to score points off TSMC, which has prominently rejected the idea of building fabs in Europe. By prominently advertising its willingness to do so, Intel is positioning itself as a friend to European semiconductor requirements at a time when the auto industry is desperate for a lifeline. Intel hasn’t announced where it may site its future factories, but rumors have previously pointed to a former airbase in Germany as a possible location, in addition to the expansion planned at Leixlip.
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