Intel to manufacture chips for cars to address US shortage, CEO says

It will allow other companies to produce semiconductor chips for car makers using its factory network

Pat Gelsinger, chief executive officer of VMWare Inc., speaks during a Bloomberg Television interview at the Goldman Sachs Technology and Internet Conference in San Francisco, California, U.S., on Tuesday, Feb. 14, 2017. The conference brings together thought leaders both from the corporate and investing worlds. Photographer: Tony Avelar/Bloomberg
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Intel, the world's largest chip maker by revenue, plans to manufacture in-demand semiconductors for cars to alleviate the shortage that has hobbled the industry worldwide.

The company is in discussions with companies that design components for car makers to allow them to manufacture chips inside Intel’s factory network. It aims to start producing them within six to nine months.

“We are hoping that some of these things can be alleviated, not requiring a three- or four-year factory build, but maybe six months of new products being certified on some of our existing processes,” said Pat Gelsinger, who was appointed Intel's chief executive in January.

“We have begun those engagements already with some of the key components suppliers.”

Mr Gelsinger did not name the suppliers.

Semiconductors chips are important components, particularly in electric and self-driving vehicles.

They are used to manage functions such as navigation, parking sensors and for monitoring engine performance.

The global car industry is dealing with a severe shortage in semiconductors chips due to a surge in demand for electronics amid the coronavirus pandemic.

Mr Gelsinger, who met with White House officials on Monday to discuss the semiconductor supply chain, said manufacturing could take place at Intel’s factories in Oregon, Arizona, New Mexico, Israel and Ireland.

Intel will spend $20 billion building two factories at its manufacturing site in Arizona. Reuters
Intel will spend $20 billion building two factories at its manufacturing site in Arizona. Reuters

Industry experts said chips are expected to remain in short supply in the coming months.

Global chip sales are forecast to surge 8.4 per cent this year from last year's total of $433bn, according to the Semiconductor Industry Association. This is up from 5.1 per cent growth witnessed in 2020.

The global shortage of semiconductors chips has halted production at many car plants around the world.

Last month, Detroit-based General Motors extended production cuts in North America because of semiconductor shortage.

Michigan-based Ford said it is letting thousands of new vehicles sit idle at assembly plants because of the chip deficit. It means the company could miss out on $1 billion to $2.5bn in sales.

Intel designs and produces its own chips.

Last month, it announced it would invest $20bn to build two factories in Arizona to challenge the growing dominance of other manufacturers such as Taiwan Semiconductor Manufacturing Company and Samsung Electronics.

The investment is expected to create 3,000 new jobs in the high-tech sector, the company said.

“The US is the birthplace of [semiconductor] technology, but over the years we have underinvested in production and hurt our innovative edge, while other countries have learnt from our example,” said US Secretary of Commerce Gina Raimondo last month.

“An investment [$20bn] of this scale will help to preserve US technology innovation and leadership … and protect and grow American jobs."