Things are really starting to get cooking in the semiconductor industry. If anyone thought that the lockdowns due to COVID would not alter the future supply chain construction, this industry is proving otherwise.
All semiconductor companies are spending huge sums of money on plants. We are seeing the totals entering the hundreds of billions of dollars. This is something that is becoming a major revolution in the industry. In short, we are going to see a massive explosion in chip-making come the middle of the decade.
At the head of the list is Intel. The once industry leader is trying to regain its former glory by outbuilding everyone else. They are throwing up plants all over the world.
We are now to the point where it is hard to keep up with all that is taking place.
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Mega-Fab In Ohio
How does a 3,600 acre campus sound? That is a mini-city when you think about it. If reports are true, this is going to be the size of the newest Intel project, just outside Columbus, Ohio. It is going to be a mega-fab plant which makes chips for not only Intel, but other companies as well.
Companies such as Qualcomm and Amazon Web Services already signed up. This is only going to enhance Intel's ability to generate more revenue.
They are going to need it of course. The price tag for this operation is reported to be $20 billion. It is a figure that is on top of the already $20 billion that Intel is spending on two plants going into Arizona.
A few months ago, an article detailed what a couple other companies are looking at spending on semiconductor factories.
Samsung announced in May that it would spend $151 billion over the next decade to boost its semiconductor capacity. TSMC made a similar announcement in April, pledging to invest $100 billion in the next three years alone.
Putting the addition $20 billion and this puts the latest count for the Intel, Samsung, and TSMC chip-making factories at over $80 billion. This is for 5 plants. Samsung recently announced $17 billion for a plant in Texas.
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National Security
At this point, the semiconductor industry is a matter of national security. Last year, the US Congress passed a bill that allocated $50 billion into semiconductor infrastructure. This was obviously dwarfed by private investment, now at $80+ billion and counting.
Few doubt that our digital world is growing. Each country is well aware that without semiconductor capacity, it is at the mercy of other countries. This is viewed as essential to economic output meaning that governments do not want to be exposed in such a manner.
Japan is rumored to be looking at footing the bill for a $7 billion within that country. It would be a development between Sony and TSMC. Of course, the one major factor is that before any export can take place, all Japanese companies needs must be fulfilled.
This is only going to keep growing as our need for chips increases. Many talked about the Internet-of-Things for years, without much happening. Naturally, we know how people like to use buzzwords that end up not applying (remember Information Superhighway). Nevertheless, there is no dispute that we are putting chips and sensors in more devices and the connections to the Internet are growing a great deal.
Advancement is going to depend upon not only on chip development going forward but also the ability to stamp large numbers out. To do this, the world needs a ton of capacity. Hundreds of billions are being dumped into construction projects to meet this need.
High end manufacturing of this nature is going to return to the developed countries. Each is going to insist on having chip production within its borders. If not, one is at the mercy of those outside their control. This is not going to happen to the top economies. Governments are going to ensure they are protected.
We should not be surprised if there is another announcement at some point in 2022 of another plant going into the United States. It is a move that would likely push the total over $100 billion.
Semiconductor companies are in a fantastic position. They cannot outproduce demand. Everything they churn out will be sold. Their biggest challenge is to keep upgrading chips at a pace their customers require. As many noted, Moore's Law appears to be slowing down.
As for Intel, it will be interesting to see if their strategy for reclaiming lost glory works. For the moment, the plan is simply to out construct the competition. There is a lot to be said for having the manufacturing capacity down the road.
We all know it is going to be needed.
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