Intel delays $20 billion chip factory over ‘leverage’

Ohio Gov. Mike DeWine still has high hopes for Intel, even after the company announced that its massive semiconductor factory project east of Columbus could be scaled back or built. delayed.

“I really believe it’s Midwest time. I believe it’s Ohio time,” DeWine, a Republican, said in an interview.

Intel announced it was canceling a July 22 groundbreaking ceremony at the site pending Congress passing the CHIPS Act, which includes $52 billion in aid for the U.S. semiconductor industry to revitalize a key segment of the national supply chain.

“The idea of ​​delaying a ceremonial announcement sucks,” Intel CEO Patrick Gelsinger told CNBC’s Sara Eisen during a Wednesday appearance at the Aspen Ideas Festival.

But Gelsinger said without legislation — and help — it doesn’t yet make sense to move forward.

“It’s a huge signal to industry, the tech community, and the world that the United States is serious about building this industry on American soil,” Gelsinger said.

The company reported $20 billion in profits last year.

DeWine suggested the delay is a bargaining tactic on the company’s part to push through the legislation.

“I don’t think they wanted to be in a position where they would say to Congress, we’re innovating, and Congress still hadn’t passed the CHIPS Act,” he said. “I think maybe it’s a bit of leverage or a bit of, hey, let’s pay attention to that.”

DeWine, a former U.S. senator and congressman, said he received assurances from former colleagues on both sides of the aisle that the law would pass soon.

And he said that Intel has always told state officials that the scope of the project is dependent on funding from the CHIPS Act.

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

Justin Merriman | Getty Images

Gelsinger confirmed that Intel is still engaged in Ohio, but he said the scope of the project depends on whether the legislation is passed.

“When we made the announcement, we said we were either going to go slow and small or we’re going to go big and bold,” he said.

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

“But they also said, ‘Look, if we don’t have the CHIPS law, we just can’t do this. We’re coming to Ohio, but we’re not going to drive that fast. “”

In Aspen, Gelsinger indicated that more investments could be transferred to Europe if the CHIPS law is not passed.

Rust Belt ‘Silicon Heartland’

Even a scaled-down version of the development has the potential to be transformative for Ohio, once considered the loop of the Rust Belt. Intel has dubbed the project and the supporting companies expected to grow around it “Silicon Heartland,” leveraging the region’s manufacturing heritage and utilizing a new tech talent base from the State University of India. Nearby Ohio and other Midwestern schools.

At Ohio State, which was already adding 100 new engineering faculty positions when the plant was announced, university president Kristina Johnson sees the school playing a role similar to that which Stanford University – her alma mater – plays in Silicon Valley.

“I’ve seen how you work with community colleges to build pathways to academic research universities, like Stanford or Berkeley,” she said in an interview. “We’re creating a network. A Midwestern semiconductor research network.”

Intel director of global operations Keyvan Esfarjani, who oversaw the site selection process, said the ability to develop a regional talent pool was a key consideration in choosing Ohio.

U.S. President Joe Biden puts his arm around Intel CEO Patrick Gelsinger during an event on persistent supply chain issues in the South Court Auditorium of the Eisenhower Executive Office Building on January 21, 2022 in Washington, DC. Gelsinger announced that Intel Corp will invest an initial $20 billion to develop a new semiconductor manufacturing facility in Ohio.

Somodevilla chip | Getty Images

“We can go there, we can develop the talent, we can develop the skills. (There are) the best universities around. We have Purdue, University of Michigan, Illinois, Ohio State, Carnegie Mellon, Georgia Tech, I mean, those are targeting schools,” he said.

He said another draw was the area’s infrastructure, including a 1,000-acre site in rural Licking County, east of Columbus, with easy access to the massive amounts of water needed to a modern semiconductor factory. Among the $2 billion in incentives Intel is about to raise in Ohio are nearly $700 million in infrastructure improvements.

Those factors — labor and infrastructure — typically top the list for companies looking to build big projects, site-selection experts tell CNBC, as the country looks to bolster the supply chain. national supply for products such as semiconductors. Labor and infrastructure are also the two most important categories in CNBC’s 2022 America’s Top States for Business ranking, which will be released on July 13.

Inclusiveness in site selection

Intel’s factory will come too late for recent Ohio State engineering graduate Robert Yengo, who grew up in the Columbus area and will start his first job in Texas. But he’s happy to see the potential development, and he hopes Intel will provide opportunities for underserved communities in the region.

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

Esfarjani said diversity, equity and inclusion were priorities in Intel’s site selection process, and he said some states — he didn’t specify which ones — weren’t taken. into account because they were not sufficiently inclusive.

“The diverse pool of talent we have in Ohio is simply unmatched,” he said. “Whether it was ethnicity, whether it was technical women from surrounding universities or community colleges, I mean, that was one of the big checkmarks.”

A potential stumbling block, particularly when it comes to “technical women,” is Ohio’s strict ban on abortions after six weeks of pregnancy, signed into law by DeWine in 2019 and now in effect after the Supreme Court canceled Roe against Wade.

Intel declined to comment on the law except to reiterate its commitment 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 to choose what best meets their health needs,” the company said in a statement. “Our health care options in the United States cover a wide range of medical treatments, including abortion, as part of our comprehensive family planning benefits.”

DeWine said the subject of abortion had never come up in the state’s discussions with Intel, either before or after the Supreme Court ruling.

“Abortion is something where reasonable people are on both sides of the issue,” he said. “What I’ve been emphasizing in Ohio is our need to focus on what we can agree on. What we can agree on because we have to help the kids.”

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

“If they follow the law, which they will do, that’s nothing we’re going to get involved in,” he said.