MEMS and Sensors

Intel to build two new chip fabs in Arizona

24 March 2021
When completed, the six factory Ocotillo megafactory will be Intel’s largest manufacturing facility in the world. Source: Intel

In a bid to expand domestic U.S. chip manufacturing, Intel Corp. said it plans to invest $20 billion in two new fabs at its Ocotillo campus in Chandler, Arizona, with construction to begin immediately.

Additionally, Intel will create a new foundry business model providing chip manufacturing capabilities to U.S. and foreign fabless companies. The new factories will expand capacity for Intel’s current products and customers as well as provide capacity for the new so-called Intel Foundry Services (IFS).

“This new investment will advance the ecosystem of innovation we’ve helped create in Arizona and increase U.S. semiconductor manufacturing capacity,” said Keyvan Esfarjani, senior vice president in manufacturing and operations at Intel.

Since the outbreak of the COVID-19 pandemic, semiconductor manufacturing has been hit hard with supply chain issues causing a shortage in semiconductors, particularly in the automotive sector. While COVID-19 is the root cause of the shortage, it served as the final straw for many organizations in the U.S. as well as domestic companies that are calling for an expansion of domestic chipmaking.

The U.S. government has also gotten involved, declaring semiconductors as a strategic resource and enacted the National Defense Authorization Act (NDAA), which has a provision in it called Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act. The legislation would create a 40% refundable investment tax credit for qualified semiconductor equipment or any qualified semiconductor manufacturing facility investment expenditures through 2024. It would also direct the Secretary of Commerce to create a $10 billion federal match program that matches state and local incentives offered to a company for building a semiconductor foundry with advanced manufacturing capabilities. Funding would also be allotted for R&D investments and other funding to increase the engineering workforce.

Phil Amsrud, senior principal analyst for automotive at IHS Markit, told Electronics360 that fab investments in the U.S. are healthy and will help solve long-term issues in the market but the short-term supply chain issues will have to be worked out over time, likely for the remainder of 2021. However, moving forward, the industry will need to refocus on differing priorities.

“How we got here is that the industry by and large put a priority on cost reduction and how they could make electronics cheaper than the year before,” Amsrud said “Because of what we saw with COVID, now we are at a point where it will be hard to not put the supply assurance on the same level as cost reduction. Cost reduction is one part of this for sure but how the supply is guaranteed is equally as important now.”

Intel is not the only vendor building in Arizona. Last year, Taiwan Semiconductor Manufacturing Corp. (TSMC) announced it was constructing a new fab in Arizona and revealed it was expanding that investment to $35 billion, nearly tripling the $12 billion it originally committed. The expansion will allow TSMC to turn the Arizona facility into a gigafab capable of producing 100,000 wafers per month.

Manufacturing internally

With the announcement of fab expansion, Intel confirmed that it would continue manufacturing most of its products internally and that the development of 7 nm process technology is progressing, driven by increased use of extreme ultraviolet lithography (EUV) in a rearchitected, simplified process flow. Intel CEO Pat Gelsinger said Intel expects to tape in the compute tile for its first 7 nm client CPU, code-named Meteor Lake, in the second quarter of the year.

That said, Intel will continue to build on its existing relationships with third-party foundries that manufacture a range of devices including communications and connectivity parts to graphics and chipsets. Gelsinger said Intel’s work with third-party foundries will include products at the core of Intel’s computing offering for both client and data center segments beginning in 2023.

Foundry business

The IFS will provide foundry services to U.S.- and European-based companies to meet the global demand for semiconductor manufacturing. IFS will be differentiated from other foundries in that it will combine edge process technology with packaging as well as an IP portfolio for customers including x86 cores as well as ARM and RISC-V ecosystem IPs.

“As President Biden has said, the U.S. is the birthplace of [semiconductor] technology, but over the years we have underinvested in production and hurt our innovative edge, while other countries have learned from our example and increased their investments in the industry,” said Gina Raimondo, U.S. Secretary of Commerce. “An investment of this scale will help to preserve U.S. technology innovation and leadership, strengthen U.S. economic and national security, and protect and grow American jobs. Working together, we can maintain America’s place as a technology and innovation leader.”

Intel’s Ocotillo campus is the first mega-factory network with four factories connected via a mile-long automated highway. When Intel’s two new fabs are added to the mega-factory, Ocotillo will become Intel’s largest manufacturing site in the world, covering 700 acres. This will generate 3,000 high tech Intel jobs, 3,000 construction jobs and 15,000 long-term jobs in the surrounding area.

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