Chips Act an ‘Accelerant’ for Intel’s Investment Plans, Says CEO

Intel was “very excited to see” the introduction Tuesday of HR-4521, House Democrats’ proposed companion to the Senate-passed U.S. Innovation and Competition Act (S-1260), said CEO Pat Gelsinger on a Q4 earnings call Wednesday. The measure, like S-1260, includes $52 billion in subsidies to encourage U.S.-based semiconductor manufacturing and R&D, but it got a mixed reception from lawmakers and the tech sector (see 2201260062).

President Joe Biden and members of his administration “have been clear on the importance of this transformational investment,” said Gelsinger. “It's encouraging to see the strong bipartisan and bicameral support as we continue to work together to address the long-term impacts of the semiconductor shortage, restore U.S. leadership in this critical industry and rebalance the global supply chain.” Gelsinger traveled to the White House Jan. 21, joining Biden to appeal for enactment of the legislation (see 2201210041).

Gelsinger is “highly encouraged” with HR-4521's introduction in the House, he said. He spoke with Speaker Nancy Pelosi, D-Calif., “at length on this subject just yesterday,” he said. He expects HR-4521 “will be debated on the floor next week, and hopefully, following what we expect will be passage in the House, a reconciliation process” with S-1260, he said. “So I'd say everybody is now more optimistic on this coming across the line in the near future.”

Intel and others viewed enactment “as an accelerant for our investment plans,” said Gelsinger. Of the $20 billion campus that Intel is building in Ohio, “it could either be small or it could be big and fast,” he said. “With the passage of the Chips Act, it's going to be bigger, and we're going to build it out faster as a result.”

“Unprecedented demand” and “ecosystem supply constraints” were the semiconductor industry’s “two recurring themes” for 2021, said Gelsinger. “The strong demand we saw throughout 2021 continued in Q4, and markets remained robust across all our businesses.” Intel shares closed 7% lower Thursday at $48.05.

Strong demand trends are expected to continue, as the “digitization of everything” spawns an era “of sustainable growth,” said Gelsinger. Last year was the best in a decade for the PC industry, as “higher PC density, shorter replacement cycles and increased market penetration” drove the industry’s 15% growth rate, he said.

The unprecedented demand “continues to be tempered by supply chain constraints as shortages in substrates, components and foundry silicon has limited our customers' ability to ship finished systems,” said Gelsinger. This was most “acutely felt” in notebooks, “but constraints have widely impacted other markets,” including automotive, IoT and the data center, he said.

The “ecosystem constraints” are expected to persist through 2022 and into 2023, “with incremental improvements over this period,” said Gelsinger. “The industry will continue to see challenges in a variety of areas, including specialty and overall foundry shortages, substrates as well as third-party silicon.” Intel remains “more resilient” than most “to foundry price increases, as only a minority of our volume is produced by third parties,” he said. Taiwan Semiconductor Manufacturing Co. is Intel’s largest outside wafer supplier, and Intel is TSMC’s largest customer.