Intel to Invest at Least $20 Billion in New Chip Factories in Ohio

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Intel has selected Ohio for a new chip manufacturing complex that would cost at least $20 billion, ramping up an effort to increase U.S. production of computer chips as users grapple with a lingering shortage of the vital components.

Intel said on Friday that the new site near Columbus would initially have two chip factories and would directly employ 3,000 people, while creating 7,000 short-term construction jobs and tens of thousands of permanent positions at suppliers and partners.

Patrick Gelsinger, who became Intel’s chief executive last year, has rapidly increased the company’s investments in manufacturing to help reduce U.S. reliance on foreign chip makers while lobbying Congress to pass incentives aimed at increasing domestic chip production. He said Intel hoped to invest as much as $100 billion over a decade to build up to eight factories on the Ohio campus, linking the scope and speed of that expansion to expected federal grants if Congress approves a spending package known as the CHIPS Act.

“We are putting our chips on the table,” Mr. Gelsinger said at White House event on Friday. “But this project will be bigger and faster with the CHIPS Act.”

President Biden, who has pushed for the legislation, argued that the CHIPS Act and U.S. investments by Intel and other chip makers were crucial for the economy, national security and economic competition.

“China is doing everything it can to take over the global market,” he said.

Intel’s move has wide-ranging geopolitical implications, as well as significance for supply chains. Chips, which act as the brains of computers and many other devices, are largely manufactured in Taiwan, which China has expressed territorial claims toward. During the pandemic, they have also been in short supply because of overwhelming demand and coronavirus-related disruptions to manufacturing and labor supply, raising questions about how to ensure a consistent chip pipeline.

The move is Intel’s first to a new state for manufacturing in more than 40 years. The company, based in Silicon Valley, has U.S. factories in Oregon, New Mexico and Arizona. In March, Mr. Gelsinger chose an existing complex near Phoenix for a $20 billion expansion, which is underway.

But Mr. Gelsinger had also asserted that a new location was needed to provide additional talent, water, electrical power and other resources for the complex process of making chips. Intel has combed the country for sites, prompting states to compete for one of the biggest economic development prizes in recent memory.

The site chosen for the new plant, in New Albany, a suburb east of Columbus, is in an area known for inexpensive land and housing. Nearby Ohio State University is a major source of graduates with engineering degrees whom Intel could recruit. Columbus is also centrally located for receiving supplies and for shipping finished chips.

Construction of the first two factories is expected to begin this year with production to start by 2025, Intel said. The site, which Mr. Gelsinger called a catalyst for a new “Silicon Heartland,” is more than 1,000 acres and is expected to be the largest economic development project in Ohio’s history.

Mike DeWine, Ohio’s governor, called the Intel choice a “transformative” event for the state, the result of a process that began in May and ended when the company informed officials of its decision on Christmas.

“There were 40 states competing to get these plants — and we won,” he said during an event on Friday near the future Intel campus.

Mr. Gelsinger, a 30-year Intel veteran who became chief of the software maker VMware in 2012, returned to the chip maker last year to become chief executive as the semiconductor shortage began hobbling carmakers and other companies.

The shortage was partly rooted in the pandemic, but another long-term factor was the shifting of chip manufacturing to Asian countries that offer subsidies to companies that build factories there. The United States accounts for about 12 percent of global chip production, down from 37 percent in 1990. Europe’s share has declined to 9 percent from 40 percent over that period.

Many of the most advanced chips come from Taiwan Semiconductor Manufacturing Company, whose proximity to China has worried Pentagon officials.

Legislation passed by the Senate with bipartisan support in June would provide $52 billion in subsidies for the chip industry, including grants to companies that build U.S. factories. The package has since become caught up in House bickering over the Biden administration’s priorities, though Mr. Gelsinger and others have said they are hopeful it will pass in the coming months.

In Europe, Mr. Gelsinger has also lobbied officials for a similar package of subsidies that could aid the construction of a big Intel factory there, with a projected price tag comparable to the U.S. expansion.

Ohio has not previously had a chip manufacturing presence. Moving to a state without existing chip factories presents challenges, such as obtaining permits and persuading suppliers of gases, chemicals and production machines to set up nearby offices, said Dan Hutcheson, an analyst at VLSI Research. On the other hand, having plants in more states provides lobbying leverage in Washington, he said.

Intel is not the only company expanding U.S. production. TSMC began construction last year on a $12 billion complex about 50 miles from Intel’s site near Phoenix. Samsung Electronics selected Taylor, Texas, for a $17 billion factory, with construction set to begin in 2022.

Mr. Gelsinger’s strategy is based partly on a bet that Intel can rival TSMC and Samsung in manufacturing chips to order for other companies. For most of its existence, Intel has built only the microprocessors and other chips it designs and sells itself.

The strategy is risky, as Intel has fallen behind its Asian rivals in packing more circuitry onto each slice of silicon, which increases the abilities of devices like smartphones and computers. Mr. Gelsinger has said Intel is on track to catch up over several years, but it won’t be easy, as those companies continue to make new developments of their own.

Intel “is catching up, but they have not caught up,” Mr. Hutcheson said.