(Bloomberg) — Intel Corp. is spending $7.1 billion on new chip packaging facilities in Malaysia, a major investment to ramp up its global footprint and address a crippling global chip shortage it expects to persist until 2023.
The company is earmarking more than 30 billion ringgit toward expanding its capacity in the country, Chief Executive Officer Pat Gelsinger told reporters Thursday. Part of that will bankroll a new packaging plant expected to begin production in 2024, he said.
The project marks a big bet on Malaysia, which is emerging as a global center for testing and assembling semiconductors. The U.S. chipmaker intends to shore up its capabilities in the island state of Penang, creating a sprawling complex that will serve industries from cars to electronics across Asia.
It’s part of a global expansion as Gelsinger moves to staunch market share losses and customer defections stemming in part from stumbles in upgrading technology. Gelsinger took the helm of the largest American chipmaker in February with a mandate to take back leadership of the industry from Asian giants such as Taiwan Semiconductor Manufacturing Co. Intel will outline expansions in the U.S. and Europe next year, he said Thursday.
At the same time, years of global industry under-investment and a surge in Covid-era demand for computing devices have created an unprecedented shortage of the semiconductors needed in everything from autos to smartphones. Gelsinger, who said chip demand climbed 20% during the pandemic overall, expects the crunch to last till 2023.
READ: Intel CEO to Visit Taiwan for Talks Crucial to Turnaround Bid
Gelsinger was in Taiwan and Malaysia this week for talks that underscore how Asian manufacturing will be crucial to his turnaround efforts. His trip included plans for a meeting with leaders of TSMC, according to people familiar with his schedule.
Intel both needs TSMC’s advanced manufacturing services and plans to compete with the Taiwanese company in the so-called foundry business, a tricky balancing act for the CEO. Apart from Malaysia, Intel also operates a plant in Dalian, China.
This is Gelsinger’s first trip to Asia since taking the top job at Intel and comes as he lobbies the U.S. government to allocate money for the country’s chip industry to domestic chipmakers only. He has argued that overseas manufacturers — such as TSMC and Samsung Electronics Co., which both have plans to build plants in the U.S. — shouldn’t get money through the Chips Act, which is going through political approvals in Washington. As part of those efforts, he’s argued the concentration of advanced manufacturing in Asia and Taiwan is a strategic risk.
READ: Malaysia Pushes Tech Hub to Help Economy Ride Out Pandemic
Malaysia alone accounts for 13% of the world’s chip testing and packaging, a key step in readying semiconductors for cars, phones and other devices, and Penang has emerged as the nation’s electrical and electronics hub. More than half a million people were employed in the E&E industry in 2020, working with global chipmakers from STMicroelectronics NV and Infineon Technologies AG to Intel and Renesas Electronics Corp.
The expansion of Intel’s facilities in Malaysia will create more than 4,000 positions for the company as well as over 5,000 construction jobs for local Malaysians, Trade Minister Azmin Ali told reporters. The nation approved 47 billion ringgit of investment — mostly foreign — in the E&E sector in the first half of the year versus 5 billion ringgit in the year-ago period, Azmin said.
As in other manufacturing hubs across the world, the pandemic has upended supply and production chains and depressed fundamental demand. Malaysia is now keen to continue attracting the big-name investment and jobs it needs to climb the tech ladder and keep the local economy humming.
READ: The World’s Relentless Demand for Chips Turns Deadly in Malaysia
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