Intel CEO: Chip Fabs Are As Strategical Important As Oil

For the past five decades oil reserves defined geopolitics, but Intel’s Pat Gelsinger says semiconductor fabs are now equally important

The CEO of Intel has Pat Gelsinger has opened up about what he believes is the strategic importance nowadays of semiconductor fabrication plants (fabs).

With the global chip shortage over the past few years during the Covid-19 pandemic, the chip boss compared semiconductors to oil, and said making more chips in the United States and Europe can avoid global crises in the future.

Pat Gelsinger made in the comments in an interview on CNBC’s “Squawk Box” on Wednesday, before he testified before the US Senate.

intel pat gelsinger
Intel chief executive Pat Gelsinger

Strategically important

During the interview Gelsinger pointed out that Intel has been investing billions of dollars to build chip plants in the US and Europe, and suggested computer chips will play a central role in international relations in the decades ahead.

Indeed, Intel last week confirmed it would will invest an initial 17 billion euros into a leading-edge semiconductor fab mega-site in Magdeburg, Germany, and would also create a new R&D and design hub in France.

“Oil reserves have defined geopolitics for the last five decades. Where the fabs [factories] are for a digital future is more important,” Gelsinger was quoted as saying in the CNBC interview.

“Let’s build them where we want them, and define the world that we want to be part of in the US and Europe,” he said.

The vast majority of computer chips are currently made in Asia, especially Taiwan.

A severe drought in that country, coupled with supply chain issues during the Coronavirus pandemic, has badly hampered the delivery of sufficient number of chips in the past couple of years.

Invasion threats

The fact that most manufacturing takes place in Taiwan, has also raised security concerns amid Russia’s invasion of Ukraine.

China it should be remembered claims Taiwan as its own province, and has ramped up its military presence near the democratically ruled island in recent years.

Intel under Gelsinger’s tenure, has sought to geographically diversify its chip manufacturing capabilities, and Intel has been urging both Washington and Brussels to support legislation that would include government money to assist in semiconductor production.

Indeed, Gelsinger in March 2021 stated Intel was seeking 8 billion euros (£7bn) in public subsidies for its planned semiconductor plant in Europe.

Public subsidiaries

And it seems that his pressure has been successful.

Last month for example the European Commission proposed the European Chips Act.

The proposed law is touted as a way to bolster Europe’s self sufficiency in the semiconductor sector, by easing state aid rules, improving tools to anticipate shortages and crisis, and strengthen research capacity in the bloc.

The US meanwhile has proposed the $52 billion in the US Chip Act to ramp up domestic chip production in the United States. In January Intel announced plans to build a $20 billion US chipmaking facility in Ohio.

Gelsinger’s comments Wednesday came ahead of his testimony before the US Senate in support of the US Chip Act subsidy plan.

During his interview, Geslinger also expressed concern for the humanitarian consequences of Russia’s attack on Ukraine, while also pointing to economic implications.

“While the Russia-Ukraine situation isn’t central to any of the supply chains for semiconductors, it just reinforces the geopolitical instability and the urgency around building supply chains that are geographically balanced – US, Europe and Asia – and far more resilient for the digital future,” he said.

“Everything digital runs on semiconductors, and it is just essential that we build these fabs where we want them.”