Intel Delays $20B Chip Plant Construction Due to ‘Leverage’

Ohio Gov. Mike DeWine still has high hopes for Inteleven after the company announced that its plan for a large semiconductor plant east of Columbus could result in downsizing or delaying construction.

“I truly believe the time has come for the Midwest. I think it’s time for Ohio,” DeWine, a Republican, said in an interview.

Intel said it was canceling a groundbreaking ceremony scheduled for July 22 while the company waits for Congress to pass a chip bill that includes $52 billion in aid for the US semiconductor industry to revitalize a key segment of the domestic supply chain.

“The idea of ​​postponing the grand announcement sucks,” Intel CEO Patrick Gelsinger told CNBC’s Sarah Eisen during a conference call Wednesday. Aspen Ideas Festival.

But Gelsinger said that without legislation and assistance, there is no point in moving forward just yet.

“This is a powerful signal to the industry, the tech community and the world that the US is serious about building this industry on American soil,” Gelsinger said.

Company informed $20 billion in profit last year.

DeWine suggested that the delay was a negotiating tactic by the company to get the law passed.

“I don’t think they wanted to be in a position where they would tell Congress that we are breaking new ground and Congress still hasn’t passed the Chip Act,” he said. “I think it’s a little, maybe leverage or a little, hey let’s pay attention to that.”

DeWine, a former US senator and congressman, said he received assurances from former colleagues on both sides of the aisle that legislation would be passed soon.

And he said that Intel has always told government officials that the scale of the project depends on the funding of the Chip Act.

Republican Governor-elect Ohio Attorney General Mike DeWine delivers his victory speech after winning the Ohio gubernatorial race at the Ohio GOP Election Party at Sheraton Capitol Square November 6, 2018 in Columbus, Ohio.

Justin Merriman | Getty Images

Gelsinger confirmed that Intel remains committed to Ohio, but said the scale of the project depends on whether legislation is passed.

“When we made the announcement, we said we were either going to take things slowly and little by little, or we would take things big and bold,” he said.

DeWine said Intel told his team that funding under the CHIPS Act would be the difference between a $20 billion project built over several years and an $80-100 billion investment “over a relatively short period of time.”

“But they also said, ‘Look, if we don’t have a Chip Law, we just can’t do it. We’re coming to Ohio, but we’re not going to move that fast.”

At Aspen, Gelsinger indicated that more investment could move to Europe if the chip law is not passed.

Rust Belt “Silicon Heart”

Even a smaller version of the development can change the life of Ohio, which was once considered a rust belt buckle. Intel named the project and supporting businesses expected to grow around Silicon Heart, capitalizing on the region’s manufacturing heritage and drawing on a new base of technical talent from nearby Ohio State University and other Midwestern schools.

In Ohio State, which was already adding 100 new engineering jobs when the plant was announced, university president Christina Johnson sees the school playing the same role that Stanford University, her alma mater, plays in Silicon Valley.

“I’ve seen you work with community colleges to create pathways to research universities like Stanford or Berkeley,” she said in an interview. “We are building a network. Semiconductor Research Network in the Midwest”.

Intel Chief Global Operations Officer Keyvan Esfarjani, who oversaw the site selection process, said Ohio’s ability to develop a regional talent pool was a key factor in choosing Ohio.

U.S. President Joe Biden lays his hand on Intel CEO Patrick Gelsinger during an event on current supply chain issues in the Eisenhower Executive Building’s South Courtroom on January 21, 2022 in Washington, DC. Gelsinger announced that Intel will invest an initial $20 billion to build a new semiconductor manufacturing plant in Ohio.

Somodeville chip | Getty Images

“We can go there, we can develop talents, we can develop skills. (There are) better universities around. target schools,” he said.

He said another attraction is the region’s infrastructure, including a 1,000-acre site in rural Licking County, east of Columbus, with easy access to the vast amounts of water needed for a state-of-the-art semiconductor manufacturing plant. The $2 billion in incentives Intel intends to raise in Ohio includes nearly $700 million in infrastructure improvements.

Those factors — labor and infrastructure — are typically at the top of the list for companies looking to build large projects, site selection experts told CNBC as the country seeks to strengthen its domestic supply chain for products like semiconductors. Workforce and infrastructure are also the two most important categories in CNBC’s 2022 rankings. America’s Best States for Business ratings to be announced on 13 July.

Inclusiveness in the choice of location

The Intel plant is coming too late for recent Ohio engineering graduate Robert Yengo, who grew up in the Columbus area and will start his first job in Texas. But he’s excited to see the potential development and hopes Intel will bring opportunities to low-income communities in the region.

“There’s a lot of human capital in Columbus and it’s not fully cultivated,” he said.

Esfarjani said diversity, fairness and inclusiveness were priorities in Intel’s site selection process, and he said some states – he didn’t specify which ones – were excluded from consideration because they weren’t inclusive enough.

“The diversity of talent that we have in Ohio is unmatched,” he said. “Whether it’s ethnicity, whether it’s tech women from nearby universities or community colleges, I mean that was one of the big ticks.”

One potential stumbling block, especially when it comes to “tech women,” is DeWine’s strict ban on abortion after six weeks of pregnancy, which took effect after the Supreme Court struck down Roe v. Roe. . Wade.

Intel declined to comment on the law, except to reiterate its obligation to pay for out-of-state travel for employees in need of reproductive care.

“Health-related decisions are among the most personal, and Intel respects the rights and privacy of our employees so they can choose what best suits their healthcare needs,” the company said in a statement. “Our U.S. health care options cover a wide range of medical procedures, including abortion, as part of our general family planning benefits.”

DeWine said the topic of abortion never came up in the state’s discussions with Intel before or after the Supreme Court ruling.

“Abortion is something that reasonable people are on both sides of the issue,” he said. “What I stressed in Ohio is that we need to focus on what we can agree on. What can we agree on, since we need to help children.”

DeWine said he has no problem with Intel paying for employee travel out of state.

“If they follow the law, and they will, we are not going to interfere in this,” he said.