Intel plans $3.5 billion New Mexico expansion -- predicts years of shortages

Later today, Intel will reveal details about an investment in New Mexico. In an interview with 60 minutes, Intel CEO Pat Gelsinger spilled the beans and said the firm will invest $3.5 billion to enhance production capacity at its Rio Rancho facility in New Mexico. This comes on top of an earlier announcement of a $20 billion expansion of Intel's Arizona campus.

Furthermore, Intel also plans to set up a production plant in Europe, but the chip giant hopes to get big government subsidies to make production competitive. According to Intel, about $10 billion in incentives are needed to make production in Europe work. Intel is considering setting up shop in Germany or in the Benelux region.

European and US politicians are keen on bringing back semiconductor production, partly on national security grounds. A quarter of a century ago, the US made 37 percent of global semiconductor chips. Today, this number of just 12 percent. Intel CEO Pat Gelsinger tries to surf on today's sentiment to get incentives to kickstart Intel's foundry division.

Gelsinger: Catching up with TSMC will take years

Gelsinger also admitted that TSMC is ahead and that catching up with the Taiwanese foundry giant will take Intel a couple of years:

Lesley Stahl: They're ahead of you on the manufacturing side.

Pat Gelsinger: Yeah.

Lesley Stahl: Considerably ahead of you.

Pat Gelsinger: We believe it's gonna take us a couple of years and we will be caught up.

Gelsinger is making big bets: breaking ground on two new giant fabs in Arizona, costing $20 billion; Intel's largest investment ever. And he'll announce this week a three and a half billion dollar upgrade of this fab in New Mexico.

Shortages will not be gone soon

For many months now, lots of electronics parts have been in short supply. Gelsinger expects this situation will not resolve itself in the coming months. In fact, Gelsinger warns it will take a couple of years until every aspect of business has caught up with the surge in demand.

$10 billion fab in Israel too

The investments from Intel just keep coming. Reuters writes Intel is also investing $600 million in an R&D expansion of the Mobileye self-driving car unit in Israel. Furthermore, Intel confirmed it's spending $10 billion on a new production facility in Israel. The first phase of construction has already begun. The news about this plant was announced by Israel in 2019, but up until now, Intel never acknowledged it.

Israel's Finance Ministry in early 2019 said Intel would get a $1 billion grant to build an $11 billion chip plant, although at the time Intel would not confirm the amount. On Sunday, Intel said investment would be $10 billion and the first phase of construction has begun.

UMC plans $3.6 billion 28nm expansion

In related news, UMC is planning a big expansion of its 28nm production capacity. While tech publications usually talk about cutting-edge production, as this is the type used for processors and video cards, a lot of today's manufacturing is done on mature nodes. UMC is investing a total of NT$100 billion, about $3.6 billion, to expand 28nm production at its 300mm Fab 12A facility in Tainan, Taiwan. In the future, this facility can be upgraded for 14nm gear.

UMC said it has worked out an agreement with several of its leading customers that’ll guarantee long-term chip supply in exchange for upfront deposits and pre-set pricing. Phase six, as the program is being called, will be equipped with mature 28nm tools that can later be swapped for 14nm gear to accommodate future roadmaps.