Intel’s reasons for delaying the production timetable for its $20 billion chip fab in Ohio have given analysts plenty of opportunity to speculate about what’s going on. The facts aren’t entirely clear.
A spokesman for the chipmaker told The Wall Street Journal Thursday that Intel remains fully committed to the project, with this explanation: “Managing large-scale projects especially in our industry often involves adapting to changing timelines. Our decisions are based on business conditions, market dynamics and being responsible toward capital.”
Initially Intel said chip production would begin in 2025, but now construction isn’t expected to finish until late 2026 with production sometime afterwards, according to sources who spoke to WSJ.
Intel officials emailed this explanation to Fierce Electronics as well:
“While we will not meet the aggressive 2025 production goal that we anticipated when we first announced the selection of Ohio in January, 2022, construction has been underway since breaking ground in late 2022 and we have not made any recent changes to our pace of construction or anticipated timelines. We’re proud to be building in the Silicon Heartland!
“We remain fully committed to the project and are continuing to make progress on the construction of the factory and supporting facilities this year. As we said in our January 2022 site-selection announcement, the scope and pace of Intel’s expansion in Ohio may depend on various conditions. We broke ground on Ohio One ahead of schedule and we are maintaining construction progress. Typical construction timelines for semiconductor manufacturing facilities are 3-5 years from groundbreaking, depending on a range of factors. “
The delay is unexpected in part because of Intel’s strong push for domestic chip production. Intel CEO Patrick Gelsinger has traveled the globe for the past two years urging governments to support chip production so that chip customers are not so heavily dependent on Asian chipmakers and primarily TSMC in Taiwan. US officials are especially worried about threats to Taiwan from China, which could cut off access to advanced chips needed in all forms of computing.
Gelsinger was also a big proponent of the CHIPS Act, which was signed into law by President Biden on Aug. 9, 2022. It gives $52.7 billion in federal funds to revitalize the US semiconductor industry, including $39 billion in grants and $13 billion in R&D and workforce development. Intel has applied for funding under the Act, along with other major chipmakers. Two small grants have been doled out, but analysts have said Biden will work with Commerce Department officials to distribute larger grants in coming months, partly as a means of bolstering his political standing during an election year.
Patrick Moorhead, founder and chief analyst at Moor Insights and Strategy, noted that both Micron and Samsung have recently delayed fab projects in the US . TSMC has also delayed the opening of its new Arizona plant. In comments on X, Moorhead blamed the delays on not getting CHIPS Act checks, adding, “the companies just can’t say this out loud.”
Jack Gold, principal analyst at J. Gold Associates, speculated that Intel could indeed be reacting to delays in getting government funding. “I doubt Intel wants to dip into its cash reserves when it calculated it wouldn’t need to due to the government subsidies and grants. That’s speculation on my part, but you don’t buy a new house if the big bonus your boss promised hasn’t shown up and you’re not sure when it will.”
Investor analyst Stacy Rasgon at Bernstein said in a note that with Intel’s decline in revenues and the likelihood of low third party foundry demand, “they simply don’t need the Ohio capacity to come online at the pace their earlier forecasts called for.” Rasgon said the news about the Ohio plant signifies a “structural reset in the company’s forward revenue expectations, at least for now.”
Many customers of chips sold by Intel and others are clearing inventory, which implies that Intel doesn’t need the extra fab capacity right now, Gold added. “When your sales are down, you don’t want to incur a major expense like building the fab that will negatively affect your bottom line,” he added.
Intel bolstered its statement emailed to Fierce with some bullets about its progress on the Ohio fab:
· More than 1.6 million work hours dedicated to the project.
· Poured more than 32,000 cubic yards of concrete, enough to fill a stadium.
· installed 4,300 tons of rebar
· installed 15,000 linear feet of underground pipe (almost 700 parking spots end to end)
· installed 210,000 linear feet of underground conduit (just over 700 football fields)
· We have hired more than 100 Ohioans, including some who are training at our locations in Arizona and Oregon.
· We currently have 800-900 construction workers on the site and expect to have several thousand by the end of the year.