- 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 offered by governments to bring this industry back within their jurisdiction. It has recently received a grant of $8.5 billion under the U.S. Chips Act. Chip manufacturing is considered a national security issue and governments have given subsidies worth tens of billions of dollars to Intel, Taiwan Semiconductor Manufacturing Company Limited (TSM) aka TSMC, and other manufacturers. However, a key issue will be the labor cost and labor training over the next few quarters. Even TSMC had to delay its $40 billion investment in Arizona, as there is a shortage of trained workers. Intel’s new chips have also failed to excite Wall Street, which puts more pressure on the foundry business.
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