In a move that will have major implications for the Valley’s economy, Intel last week unveiled plans to invest $20 billion for the construction of two new fabrication facilities at its Ocotillo campus in south Chandler over the next three years.
“As I hope you’ve gathered, Intel is back,” Intel CEO Pat Gelsinger said at a press conference March 23 announcing the tech giant’s plans. “This is the old Intel. It’s now the new Intel as we look to the future.”
That future includes 3,000 permanent high-tech, high-wage jobs; over 3,000 construction jobs; and approximately 15,000 local long-term jobs in support companies.
Intel’s investment is part of its “IDM 2.0” Initiative – a major evolution of an “integrated device manufacturing” model that Gelsinger said makes Intel “the only company with the depth and breadth of software, silicon and platforms, packaging, and process with at-scale manufacturing customers can depend on for their next-generation innovations.”
“IDM 2.0 is an elegant strategy that only Intel can deliver – and it’s a winning formula,” he said. “We will use it to design the best products and manufacture them in the best way possible for every category we compete in.”
Assisted by unspecified federal incentives from the newly passed CHIPS for America Act, which is designed to grow domestic semiconductor manufacturing, Intel’s expansion aims for an even bigger global market share in the fiercely competitive semiconductor industry.
It also comes at a time when the Biden Administration is encouraging domestic manufacturing growth in an industry beset by a worldwide semiconductor shortage.
Automakers and medical device manufacturers, among others, have been pressing for federal investment in domestic semiconductor production.
Chip shortages are disrupting digital manufacturing, from electronics to medical devices to technology and networking equipment, according to the Harvard Business Review and other sources.
Particularly hard hit is the automobile industry, the Review said, reporting that “automakers were slow to order more semiconductors and then lost out to more nimble electronics manufacturers.”
“The automotive industry is experiencing another critical market shift that has important supply chain implications: As carmakers increasingly prioritize electric vehicles, cars are becoming electronic devices,” it continued. “This means the automotive industry now must face the competing demands of all other industries, including those in electronics and those adding internet connectivity to their products.”
The strategy Gelsinger unveiled showed Intel’s determination to come to the rescue before competitors like Samsung Electronics and AMD can beat it to the punch.
“Overall, there are strong winds that are forming for expanding, accelerating and seeing the critical role that semiconductors play for the entire tech industry and, frankly, for the world as everything is becoming more digital,” Gelsinger said.
“And we are saying Intel is stepping into that gap aggressively to help provide the capacity that’s needed – U.S., Europe and worldwide.”
The plan outlined by Gelsinger includes a research partnership with IBM, which the corporation said in a release “will help unleash the potential of data and advanced computation to create immense economic value.”
Gelsinger also announced the creation of Intel Foundry Services at the Ocotillo campus to support commercial customers as well as address unique government and security requirements in the U.S.
He also stressed Intel’s commitment to accelerating semiconductor manufacturing innovation to enhance U.S. competitiveness in the global chip industry.
Gov. Doug Ducey and U.S. Senators Kyrsten Sinema and Mark Kelly hailed the announcement, as did state and regional economic development and business organizations.
Calling Intel’s move “the largest private sector investment in state history,” Ducey noted that Arizona is already a top-five state for semiconductor production, with other industry leaders choosing to start, expand or relocate operations here.
Micah Miranda, Chandler’s economic development director, noted that Intel’s investment has significant supply chain implications for local businesses since it annually spends about $1.5 billion with Chandler-based suppliers and another $3 billion with other Arizona-based suppliers.
That means Intel’s investment will likely create what one economic development official called a “spillover effect” that will see vendors relocating not only to Chandler but to other parts of the Valley, including Scottsdale, because of Intel’s location near the freeway system.
Miranda also noted that the economic ripple effect from the jobs Intel’s expansion will generate well beyond city boundaries and impact scores of industries that may not necessarily support chip manufacturing – but will support the people who make them.
That means everything from restaurants to retail could benefit.
The expansion also poses major challenges – particularly in the Valley’s housing market, where there already is a critical shortage of inventory for both resale and new homes.
As real estate experts have repeatedly pointed out in recent months, much of the developable land in East Valley has already disappeared. Chandler and Gilbert quickly are approaching build-out and only large tracts of state land in far east Mesa are ripe for major residential construction in the region.
Scottsdale could also feel the residential and industrial impact of Intel’s expansion since the Intel campus is not far off the Loop 101 Freeway.
But the employment surge also could continue the relentless uptick in home prices and rents the Valley has seen in the last year.
Intel celebrated 40 years in Chandler last year and it opened Fab 42, a $7 billion investment that created the most advanced manufacturing facility in the world, Miranda noted, stating that once the two new fabs come online, more than 15,000 Intel employees will be working in Chandler.