Setback for U.S. Chip Production Goal

The objective for the U.S. to achieve self-sufficiency in advanced chip manufacturing has encountered another obstacle. According to a report by The Wall Street Journal, Intel has decided to delay the production timeline for its $20 billion Ohio two-chip factory project. The company cited challenging market conditions and a slow distribution of U.S. government incentives as reasons for the setback.

Intel has confirmed that it will not be able to meet its initial "aggressive" 2025 production goal. However, the company expressed its unwavering commitment to the project and assured that progress is still being made on the construction of the factory and supporting facilities. Intel emphasized that the scope and speed of its expansion in Ohio may depend on funding from the Chips Act and other business conditions, as stated in their January 2022 site-selection announcement.

As a result of this news, Intel shares experienced a 2.3% decline in midday trading on Friday, bringing them down to $42.35.

Despite the delay, Intel revealed that there are currently around 800 to 900 construction workers on the Ohio site, and no recent changes have been made to the construction timelines. The company expects to have several thousand workers on the site by the end of this year.

According to The Wall Street Journal, the manufacturing facilities are not projected to be completed until late 2026, although Intel did not disclose when production would commence.

When questioned about the production delay of the Intel Ohio factories, the U.S. Commerce Department declined to comment on potential Chips Act applicants.

The Intel Delay and the Challenge of Boosting U.S. Chip Manufacturing

It seems that delays in the build-out of U.S. chip factories are plaguing the industry. Just weeks after Taiwan Semiconductor Manufacturing (TSMC) announced a second delay in their Arizona plants, Intel has also faced setbacks. These delays raise concerns about the future of chip manufacturing in the United States.

One factor contributing to the delays is the level of government incentives offered. TSMC management has hinted that their decision-making process takes these incentives into account. However, there has been criticism directed towards the U.S. Commerce Department for the slow distribution of funds from the Chips Act. This legislation, which was passed by Congress in 2022, set aside significant funding to boost chip manufacturing. However, only a few small deals have been made thus far, with the majority of the funds yet to be distributed.

Fortunately, there are indications that announcements regarding the Chips Act are on the horizon. According to the Wall Street Journal (WSJ), the Biden administration is expected to announce "billions of dollars" in incentives in the coming weeks. Additionally, Intel CEO Pat Gelsinger revealed on social media that Commerce Secretary Gina Raimondo would be attending an upcoming company event. This suggests that subsidy announcements may be imminent.

However, critics argue that these announcements may come too late and may not make a significant impact. Billions of dollars spread across multiple companies might not be enough to overcome the major delays already faced by domestic chip fabs. Therefore, there is a growing call for the government to expedite the distribution of the tens of billions of dollars available in Chips Act incentives.

Although it was mentioned in the WSJ report that Intel and TSMC are likely recipients of these incentives, it emphasized that these awards would be preliminary and subject to further due diligence.

In conclusion, there is a pressing need for swift action to address the delays in domestic chip manufacturing. The government must move quickly and leverage the available incentives to support the industry effectively.