Inside Intel’s Bold $26 Billion U.S. Plan To Regain Chip Dominance

intel was once synonymous with the world's most advanced chips it's responsible for inventing the very building blocks of modern computing from memory chips to microprocessors business models that have come about internet being one of them is all as a result of this vision that started 50 years ago with bringing the digital world onto a chip and that pace of technology innovation is unstoppable chip technology is indeed advancing at roughly the same relentless pace predicted in 1965 by intel co-founder gordon moore doubling every two years but intel has failed to keep up the chips being made inside intel's massive fabrication plants or fabs are no longer at the cutting edge intel was the moore's law company and the undisputed leader and something that was supposed to take them two years instead took them more than five and they still struggle to get back on moore's law today now only two companies in asia taiwan semiconductor manufacturing company and samsung make all of the smallest most advanced chips that power next-gen iphones super computers and automotive ai the new alder lake cpus just released are packed with competitive features but its chip technology is behind the most advanced chips made by tsmc and samsung they got fat dumb and happy and they took their eye off the ball once you fall off the treadmill it's really really difficult to get back on it's a very dynamic and fast moving industry but intel's new ceo has a bold plan to catch up and help the global chip shortage i think i have more concrete trucks working for me today than any other human on the planet right we have construction in oregon new mexico arizona ireland and israel and we expect to plant our next major fans in u.s and europe before the end of this year cnbc got an exclusive tour of intel's massive factory site outside portland oregon where it's building a huge new fab set to open early next year and so what's inside of here and what are we about to see so we're in what's inside of this truck here and what's just been offloaded onto our dock is one of our next generation tools it's going to be installed in our d1x mod 3 factory and it's spending another 20 billion on two new fabs in arizona where it will make not only its own ships but those designed by amazon qualcomm and others and it also starts building up that base within the united states so that the united states can become more self-sufficient we asked intel's top executives and semiconductor analysts about how intel fell behind and whether its aggressive plans for more u.s manufacturing could catapult it back to the front of the pack again by 2025 [Music] the story of intel's founding is also the story of how silicon valley got its name william shockley the inventor of the transistor the most basic building block of computing moved to mountain view to start shockley semiconductor labs in 1956. a year later the so-called traitorous 8 quit to start fairchild semiconductor which quickly became the world's premier chip company a decade later two of these founding fathers of silicon valley bob noyce and gordon moore left to start their own company they first called it nm electronics then quickly switched to the name intel for integrated electronics at intel's founding in 1968 short-term memory or ram didn't exist neither did microprocessors or cpus today's brains of every computer those are both intel innovations these transistors are doing most advanced computational capabilities never thought possible and it also enables the the ecosystem all around us a short three years after raising an initial funding round of just 2.5 million intel went public with a market cap of 58 million making ships with memory capabilities was great business so much so that well-established japanese electronics companies like hitachi and fujitsu wanted in a dozen years later their massive factories which had been operating 30 plus years longer than intel's were making memory chips far faster and more affordably than intel could in 1974 intel's global market share of the memory business was nearly 83 percent but by 1984 it was down to just 1.3 percent so in 1985 moore and then president andy grove famously fired themselves walked out the door then walked back in and made a drastic pivot away from memory chips and toward microprocessors this was just one year after the first mac computer came out they kind of made a decision he's a huge one to get out of that business and to bet the company effectively on this new market they remember there's no there was no pc industries no personal computer industry back then last year intel announced it's selling most of what remains of its memory business to south korean rival sk hynix for 9 billion in 1971 intel released the 4004 the world's first central processing unit or cpu for the first time engineers could purchase these building blocks to use in all kinds of electronic devices intel processors were in the world's first personal computer in 1974 and its groundbreaking x86 architecture processors were in the first ibm personal computers by 1981. it revolutionized transistor density and speed with the first 32-bit processor in 1985. it took competitor amd six years to reverse engineer a similar product suddenly personal computers had to have an intel processor to be competitive andy grove took over from moore as ceo in 1987 and time magazine named him man of the year in 1997. the market for personal computers continued to grow through the first decade of the 2000s and intel reigned supreme in making the chips that powered them in 2011 global shipments of smartphones started sneaking past pcs and that's about the same time intel turned down an early offer from apple to make crucial chips for its first iphones and that was like a massive mistake because what they actually missed and that was the start of it was the entire shift from from pc to mobile the chip world was also in the midst of another trend back when intel was first shipping out its revolutionary processors chip companies took great pride in designing and making their own chips real men have fabs was a common saying at the time but as moore's law proved true decade after decade chips got so complex that making them became an enormous undertaking building a fab today takes at least 2 years and 10 billion so huge companies like apple qualcomm and nvidia decided not to build fabs but rather to outsource the expensive highly specialized manufacturing process to companies like tsmc which focuses only on its foundry business making ships for others and this has allowed tsm to not only catch up but in my opinion surpass intel to become the world's greatest manufacturing technology on the planet despite the wild success of companies that decided to focus on designing chips like apple or only making chips like tsmc intel still does it all that makes it an integrated device manufacturer or idm kayvon sverjani joined intel in 1996 now he runs manufacturing and supply chain operations advanced equipment capabilities are becoming more expensive you got to get it right otherwise it could be very very costly since antigrove retired in 1998 intel has seen a series of chief executives who have gone back and forth about how much the company should focus on the costly manufacturing end of the chip business the most recent turnover happened in february when bob swann was replaced by pat gelsinger who started at intel in the 70s at age 18. 30 years at the company i mean i you know i joke i went through puberty i started at intel so young at age 25 gelsinger led the architecture of the 486 processor then rose to chief technology officer by 2001. he left in 2009 and after leading vmware as ceo for nearly nine years returned to run intel this year we needed a technology leader to help reestablish the technology company the this company that essentially put the silicon in silicon valley gelsinger's made some major moves since you took the helm most notably the decision to double down on manufacturing for decades the markets have rewarded giants like apple and qualcomm for being fabulous but the chip shortage has made manufacturing chips a more attractive business allowing tsmc for example to raise chip prices as much as 20 percent it takes time to build this infrastructure but the good news is the world is rallying behind building additional capacity intel is adding capacity by building a huge new fab at its massive campus outside portland oregon v1x mod 3 is about 250 000 square foot per level of the building we got an exclusive first look inside the expansion called d1x mod 3. and what exactly are you manufacturing we're manufacturing the latest uh generation of microprocessors for intel and working to enable intel's accelerated process for idm 2.0 at the company's intel accelerated event in july gelsinger laid out an aggressive idm 2.0 roadmap for how it plans to ramp capacity and catch up with big leaps in processing technologies by 2025 intel says it will surpass the chip making capabilities of both tsmc and samsung we are on a march for yearly innovation setting a pace for ourselves and the industry to not only get back but to get ahead again why should anyone trust intel again and so intel will have to make a bunch of promises both verbally and financially in my opinion at least to to get anyone to listen intel has 15 fabs all over the world china israel ireland and the u.s in oregon arizona new mexico and massachusetts it has assembly and test sites in vietnam malaysia costa rica and china and the u.s it says it makes 8 000 products outputting 2 billion units a year for some 2 000 customers now it's expanding that production specifically in the u.s and europe it's got a major fab expansion underway in ireland and is reportedly in talks for projects in italy and germany doubling down in its capacity requirements to support the growing needs of the customers around the world is absolutely a significant responsibility of what intel's got to go drive and in march intel announced it's spending 20 billion dollars to build two huge new fabs in chandler arizona it broke ground in september this year with plans to output chips for pcs and data centers by 2024. it's a very long time to build the concrete the chemical delivery the electrical systems all of this needs to be perfect for a fab to run for something that's creating lines and dimensions that are 10 000 times smaller than your hair when we toured the fab project in oregon semi trucks were dropping off some of the 1200 massive tools used to make the chips all of our tools tend to be in the millions of dollars tens of millions of dollars they weigh anywhere from 10 000 pounds to you know 100 000 pounds we also got a rare look inside the fab's bustling clean rooms donning bunny suits that help keep dust and other particles away from the minuscule circuitry on the chips you're talking about clean room that is 10 000 times cleaner than a heart surgery room it's about the equivalent of about 20 american football fields is the amount of space we have here which is clean room space it's filled with yellow light to prevent exposing the chips to shorter wavelengths of light than the lithography machines use to print designs on the chips we have different chemistries and gases we use to make our chips here at intel and we segregate those exhaust streams into these ducts you see here and are subsequently treated so that we're environmentally responsible in providing a clean air coming out of our factories making chips also takes a massive amount of water not a plentiful resource in the arizona desert we're currently out at the rongler acres water treatment facility where today we've reclaimed over 2 billion gallons of water and reuse back into our manufacturing systems and process we utilize approximately 9 million gallons a day and we conserve about 95 percent of that the chips being made here are 10 nanometer used in pcs and data centers only tsmc and samsung can currently make 5 nanometer chips the most advanced node on the market in fact intel relies on tsmc to make a good number of its chips we are one of their key customers and that collaboration continues to understand why intel has chips made by one of its competitors it's trying to catch let's talk about the different types of chips and the supply chain different size chips are found in different types of electronics intel makes a lot of 10 and 14 nanometer server chips that function as the brains of computers cpus and powerful chips used in data centers gpus less advanced 28 to 40 nanometer chips are used most in the auto industry in components like anti-lock brakes and air bags bigger chips are also used in household devices like coffee makers or electric toothbrushes five nanometer chips the most advanced chips currently made are highly sought after for data handling and artificial intelligence processing used in leading edge technologies like the latest iphones nasa rovers and f-35 fighter jets making five nanometer chips requires an extreme ultraviolet lithography machine that uses very small rays of light to etch the tiniest designs onto the chips only one company asml makes these euv machines and they cost upwards of 180 million dollars costs are going to go through the roof but if you can't yield the process without it like you have no choice intel didn't buy euv machines until a couple years after tsmc which explains why tsmc was able to reach 5 nanometer first and now tsmc will be the first to make five nanometer chips in the us building a 12 billion dollar fab just down the road from intel's new arizona fabs so where does all this leave intel it's currently in high volume production of 10 nanometer chips after years of delays 10 was supposed to be here in 2015. we still didn't even know the reasons their rationale for why 10 failed was that they just tried to do too much in july intel rebranded to avoid the nanometer-based nomenclature used by other chip giants its 7 nanometer chip which it now calls intel 4 or meteor lake has been pushed back about a year this recent delay the first setback under gelsinger has 7 nanometer in production for the second half of 2022 around the same time both tsmc and samsung have committed to start production on their three nanometer nodes they've been having process issues for 10 years 14 nanometers was delayed 10 nanometers delayed seven nanometers is delayed it's not like it's new i still don't understand how you could let something slip as much as they have like it's shocking we had some missteps the strategy you know had become a little bit confused on the role that we're going to play in manufacturing for the long term and now we're leaning back into that with clarity with clear urgency the competition between chip giants and subsequent ramp in production is a positive for the chip shortage which has impacted all types of chips apple is cutting its 2021 production targets for the iphone 13. car makers like gm and toyota have paused production at some plants when the personal computer market skyrocketed during the pandemic it drew down supplies of cpus and gpus intel blamed this component shortage for its pc chip business shrinking 2 in q3 2021 causing shares to fall more than 10 percent after earnings were announced in october intel stands alone as the only u.s us-based company that designs and manufactures advanced chips at scale traditionally it only manufactures its own designs but now in the face of the shortage it's changing that we're going to not only make our own way first we're also going to use those fabrication facilities to be producing wafers for customers that they want us to use their design it's totally a right-hand turn we have always had much debate about it intel is calling the new standalone business intel foundry services we've already have our first revenue with the amazon packaging deal our next big customers like qualcomm and the us government foundry has been wildly successful for the other two at the leading edge samsung and tsmc but analysts are not sure it'll work for intel amazon presumably it's going to be data center parts it's going to be that many units right tiny right it's like five years away and if it turns out that intel is a viable foundation great but if they're not it's no skin off their nose really the only benefit i would see to using intel is if you wanted something to be created on shore in the united states and the government is greasing the rails with the chips act a proposed 52 billion dollars in subsidies for chip companies committed to making them in the u.s this is infrastructure in 1990 37 of the world semiconductors were made in the u.s but last year that was down to just 12 percent a moon shot would be that the us is at 30 percent of manufacturing in a decade or so in the future and i think the chips act as its structure today is a great step to start to turn that in a positive direction as i like to joke god decided where the oil reserves are we can decide where the fabs are but analysts say much more is needed to help the u.s bounce back if the goal of that money is to bring like significantly more capacity on shore it's not anywhere near enough they need 10 times that amount more because 92 percent of the world's 5 nanometer chips are currently made in taiwan the entire global chip supply is vulnerable to natural disasters common there like earthquakes and its current drought and escalating geopolitical tensions between china and taiwan and subsequently the u.s china trade war every aspect of defense intelligence and government operations is becoming more digital and do we want to rely on foreign technology for those critical aspects of our defense and national security i don't think so it's critically important for not just the global supply chain but for the national security that we must maintain this journey however it is going to require intel to put its playbook into work the next steps in this playbook include a chip so efficient intel's named it not with nanometers but with an even smaller unit of measurement the angstrom intel says the 18a which is in development for 2025 will accelerate it past its competitors we will be the world's largest integrated design and manufacturer of silicon for the long term it is a tall order and is not my expectation that he will hit that but if he could hit that timetable it would put them back in my opinion on par with tsm head to head [Music] [Music] you

Channel: CNBC

Views: 1,856,112

Keywords: cnbc, cnbc television, news, breaking news, financial news, investing, stocks, intel, chips, chipmaker, chip shortage, technology, factories, manufacturing, markets, stock market, TSMC, Samsung, chip fabrication plant, RAM, microprocessor

Id: PtSSoZW19vs

Length: 19min 45sec (1185 seconds)

Published: Sat Nov 06 2021

Reddit Comments

[u/Kougar]

I swear stock image of Pentium 4 / Core 2 Duo chips are going to still be used a century from now when anyone writes a press piece on semiconductors. The thumbnail was used in the video even shows a G4400 box which is LGA1151, but that's an LGA775 processor leaning against it.

Simply building more fabs won't bring back chip dominance, and I find Pat Gelsinger's choice commentary about the US needing to build more chips a bit ironic given Intel itself is planning to build more fab capacity outside the US than within it.

[u/Dakhil]

There's also an exclusive first look of Intel's fab expansion outside Portland, Oregon, scheduled to open early next year, nicknamed DIX Mod 3.

[u/gsibble]

I’ll believe it when I see it.