Intel plots revival with $20 bln investment pledge

America's humbled chip giant Intel is trying to stage a comeback.

The centerpiece of the manufacturing turnaround plan: A proposal to spend up to $20 billion to build two factories in the U.S. and open its semiconductor-building factory floors to outside customers, in an attempt to increase chip-making on U.S. shores.

New CEO Pat Gelsinger laid out the ambitious plan this way.

"We've seen the growing demand for semiconductors. The digitization of the world. the acceleration of that in the global pandemic has radically accelerated the need for semiconductors. Against that, the world needs a balanced supply chain available across the world. Intel is stepping into that need."

The decision to invest and build new facilities in the U.S. comes after a shift in the tech world's dependence on chips made in Taiwan, which many fear could be disrupted due to rising tensions with China.

A recent shortage of chips - primarily from Taiwan Semiconductor Manufacturing Company - has caused factory shutdowns in the U.S. without the key component.

Intel says its investment will power 3,000 new tech jobs, 3,000 new construction jobs, and 15,000 long-term jobs in the U.S.

Vijay Rakesh, an analyst at Mizuho Securities, thinks Intel has an opportunity to win back business from Asia, where more than two-thirds of advanced chips are now made.

"This definitely starts to close the gap that they've had on the manufacturing side. Also with the U.S. government and the federal government, the Department of Defense, pushing to have insource our domestic manufacturing, I think, that puts Intel in a pretty good spot. So, definitely, they get some tax incentives. They bring the right people back into the fold. So, I think that's a good long-term strategy, and a pretty smart move here."

But this is just the first step in making up lost ground for investors. Shares of Intel are up 21 percent over the past year but that's just one-third the gain seen by main rival AMD.

Video Transcript

- America's humbled chip giant Intel is trying to stage a comeback. The centerpiece of the manufacturing turnaround plan, a proposal to spend up to $20 billion to build two factories in the US. And open its semiconductor building factory floors to outside customers in an attempt to increase chip making on US shores. New CEO Pat Gelsinger laid out the ambitious plan this way.

PAT GELSINGER: We've seen the growing demand for semiconductors. The digitization of the world, the acceleration of that in the global pandemic has radically accelerated the need for semiconductors. Against that, the world needs a balanced supply chain available across the world. Intel is stepping into that need.

- The decision to invest and build new factories in the US comes after a shift in the tech world's dependence on chips made in Taiwan, which many fear could be disrupted due to rising tensions with China. A recent shortage of chips, primarily from Taiwan Semiconductor Manufacturing Company, has caused factory shutdowns in the US without the key component.

Intel says its investment will power 3,000 new tech jobs, 3,000 new construction jobs, and 15,000 long term jobs in the US. Vijay Rakesh, an analyst at Mizuho Securities, thinks Intel has an opportunity to win back business from Asia where more than 2/3 of advanced chips are now made.

VIJAY RAKESH: This definitely starts to close the gap that they've had on the manufacturing side. Also with the US government and the federal government and the Department of Defense, pushing to have insourced our domestic manufacturing. I think that puts Intel in a pretty good spot.

So definitely, they get some tax incentives. They bring the right people back into the fold. So I think that's a good long term strategy, a pretty smart move here.

- But this is just the first step in making up lost ground for investors. Shares of Intel are up 21% over the past year. But that's just 1/3 the gain seen by main rival, AMD.