New Intel Corp. Chief Executive Pat Gelsinger today outlined ambitious plans he hopes will make the veteran chipmaker more competitive with rivals after losing ground for years. 

Gelsinger (pictured), who joined Intel officially last month, said in a talk late today entitled “Intel Unleashed: Engineering the Future” that the company will spend $20 billion to build two new chip manufacturing fabrication facilities in Arizona starting this year.

The fabs will power a new “foundry” service to outside chip companies, with production to start in 2024. Gelsinger also signaled plans to build more “fabs” in the U.S. and Europe in coming years to support the new unit, called Intel Foundry Services.

At the same time, Intel said it will depend more on outside fabs for some of its own chips to provide it more flexibility in producing the larger variety of chips it expects to need. Cloud providers, high-performance computing companies and makers of other electronic devices require more specialized chips to boost performance, and Intel has spent years buying makers of these chips.

In addition, Gelsinger announced progress on its critical new manufacturing process that involves seven-nanometer interconnections between chip components, a process that has been delayed repeatedly, leaving Intel behind the industry curve. He said the process is progressing well, with planned final design process called taping for a compute module for its Meteor Lake chips expected in the second quarter of this year.

Gelsinger also revealed plans for collaborating with IBM Corp. on chipmaking research and development. Not least, it signaled a post-pandemic world by announcing a new in-person event called Intel On in San Francisco in October.

“We are putting our foot on the gas,” Gelsinger said. “Intel is and will remain a leading developer of process technology and a major manufacturer of semiconductors.”

The new CEO has a big job ahead of him. And expectations are high, given his long past history with the company. Investors have bid up Intel’s shares 23% since his appointment in January.

Beyond the ambitious plans for an independent foundry business, Gelsinger had already signaled much of the broad outlines of today’s announcements before. In late January, he told investors that the company’s troubled seven-nanometer process is on track to start producing chips in 2023 but added that it will likely outsource an increasing amount of its manufacturing to other producers.

That last no doubt was partly in response to pressure by Third Point LLC. The activist hedge fund investor asked for big changes in December, including potentially selling off some of Intel’s many acquisitions and cleaving its design and manufacturing operations. Intel has steadfastly held together those functions despite the rest of the industry largely moving to a less integrated approach decades ago.

“Late product delivery, less than desired yields, competitive pressures and a reliance on x86 installed base has hurt the company,” Dave Vellante, chief analyst at SiliconANGLE sister market research firm Wikibon, said after his surprise appointment to the top job. “We believe that Intel has no choice. It must create a deep partnership with a semiconductor manufacturer aspiring to manufacture on U.S. soil, and focus Intel’s resources on design.”

However, Gelsinger’s plans appear to indicate that although Intel itself will use outside fabs for more of its own chips, it has no intention of ceding leadership in chipmaking in the U.S. and Europe. “We will continue to build the majority of our products in our fabs,” he said, though even that indicates that more of Intel’s chip production could be outsourced.

One of Intel’s biggest problems in recent years has been its attempt to move to 10 nanometers, let alone seven nanometers. Last July, in fact, Intel shocked the industry by announcing that its move to seven nanometers would be late as well.

The upshot is that despite Intel’s dominance in data center chips and the long reign of its x86 architecture chips in personal computers, its chips weren’t as competitive. It has lost ground to fast-rising competitors such as Arm Ltd. and Qualcomm Corp. in mobile devices, longtime archrival Advanced Micro Devices Inc. in mainstream processors and Nvidia Corp. for gaming and machine learning. Even Apple Inc. has begun making its own processors, which are now running its latest MacBooks.

And despite saying in January that it has made “strong progress” on fixing seven-nanometer delays, Intel has fallen behind chip manufacturing firms such as Taiwan Semiconductor Manufacturing Co., which makes chips for AMD and Nvidia, and Samsung Electronics Co.

Still, Gelsinger appeared to commit Intel to remaining a major chip manufacturer not only for its own chips but for others too. Intel Foundry Services will have independent profit-and-loss responsibilities, led by establishing a new standalone business unit, Intel Foundry Services, led by semiconductor industry and Intel veteran Dr. Randhir Thakur.

“We are ready to engage with customers today,” Gelsinger said. He cited Amazon.com Inc., Cisco Systems Inc., Google LLC, IBM, Qualcomm Corp. and Microsoft Corp. as some of the companies from which he has received “enormous enthusiasm” about the unit.

This isn’t Intel’s first attempt at providing foundry services, but Gelsinger conceded that “our first efforts were somewhat weak. We didn’t really throw ourselves behind them.”

“Overall, Gelsinger’s disclosure gave me many reasons to believe Intel is ‘back’ if the company can execute its plans,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “I don’t believe this is the extent of Intel’s investment, particularly given the need of U.S. and European governments that are asking for more onshore, leading-edge manufacturing. But this isn’t Intel hedging its manufacturing best — it looks to me as if the company is all-in.”

Gelsinger also said Intel would exceed previous estimates for earnings in the current quarter. Although Intel shares fell about 3%, to $63.48, in regular trading today before the announcements, they rose more than 4% in after-hours trading.

Gelsinger’s talk comes about two weeks ahead of another planned Intel event April 6, when it will formally unveil its latest 3rd Gen Xeon Scalable processors based on its design code-named Ice Lake-SP. The chips will go up against AMD’s new server chips, the EPYC 7003 series, introduced March 15. AMD said the series can provide more than double the performance of Intel silicon for some enterprise cloud workloads. But the new Intel chips are based on its 10-nanometer process, while AMD’s are based on a seven-nanometer process.

“While I am certain many of the gears were in motion under prior CEO Bob Swan, Gelsinger’s mark is clearly on the plans, and he exudes technical and execution confidence and openness that I haven’t seen at Intel for years,” Moorhead added.

Photo: Intel/livestream