Intel Faces A Massive Labor Cost Headwind

  • Intel Corporation is making a massive bet on its foundry business and it has invested tens of billions of dollars in building new facilities.
  • The company has received strong backing by U.S. and other Western governments who see the chip manufacturing as a national security issue.
  • However, the cost of running these factories in the western countries is a lot more expensive compared to Taiwan or South Korea.
  • This can lead to poor returns on investment on an ongoing basis which would be difficult to sustain the facilities unless Intel receives continuous subsidies over a long period.
  • It is still highly probable that geopolitical tensions will reduce and the Taiwan issue will be resolved, which can limit the ability of Intel to gain big subsidies for chip manufacturing.

Intel Corporation (NASDAQ:INTC) has invested heavily in building its own foundry business. Most of the investment will be in the U.S. and other European nations. One of the main reasons for this push is the subsidies