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U.S. priority should be American chipmakers, not TSMC: Intel chief

Washington needs to invest more in domestic companies, Gelsinger says

Intel CEO Pat Gelsinger discusses the latest in the tech industry at Fortune Brainstorm Tech on Dec. 1 in Half Moon Bay, California. (Photo courtesy of Future Brainstorm Tech)

PALO ALTO, U.S. -- The U.S. should invest more in American chipmakers rather than their Asian rivals such as TSMC and Samsung, Intel CEO Pat Gelsinger said Wednesday, adding that domestic companies would give the country more control of intellectual property.

Samsung Electronics announced last week that it will invest $17 billion to build new chip factory in Texas, part of Washington's push to bring more semiconductor manufacturing onshore. That followed Taiwan Semiconductor Manufacturing Co.'s June announcement that it had started construction on a $12 billion chip plant in Arizona.

Gelsinger, during a speech at the Fortune Brainstorm Tech conference in Half Moon Bay, California, said that while pending U.S. legislation to bolster the semiconductor industry "should support Samsung and TSMC," it also needed to invest more in American companies like Micron, Texas Instruments and Intel because "this is where you want the IP."

That legislation, the CHIPS Act, includes $52 billion earmarked for the U.S. chipmaking industry and comes as an unprecedented global chip shortage caused by the coronavirus pandemic and geopolitical tensions has spurred Washington to reduce reliance on Taiwan.

"Taiwan is not a stable place," said Gelsinger, adding that Beijing sent 27 warplanes to Taiwan's air defense identification zone this week. "Does that make you feel more comfortable or less?"

While bringing TSMC and Samsung's next fab to the U.S. can mitigate some geopolitical risk, investing in domestic chipmakers would have a greater benefit, such as owning research and development, he said. 

"Do you want to own the IP, the R&D, and tax stream associated with that or do you want that going back to Asia?" said Gelsinger.

In September, Intel broke ground on two chip plants in Arizona, which the company said was a $20 billion investment. Gelsinger said Intel is committed to being a "semiconductor manufacturing" company. It is the only major American company that both designs and manufactures chips.

Government subsidies would be essential for Intel to compete with the current chipmaking leaders TSMC and Samsung, Gelsinger added. TSMC currently dominates 52.9% of the global foundry market, while Samsung has a 17.3% share, according to Statista.

Gelsinger argued that the Taiwan and Korean governments are providing massive subsidies to support local chipmakers.

"How do you compete with a 30 to 40% subsidy? Because that means we're not competing with TSMC or Samsung, we're competing with Taiwan and Korea," he said. "The subsidies in China are even more significant."

Intel is "pushing hard" in favor of the CHIPS Act, which Gelsinger said he is "hopeful" will be passed by Congress by the end of the month.

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