Intel Corp. said today it could spend up to $95 billion to build as many as eight new semiconductor manufacturing plants in Europe, as part of its response to the ongoing global chip shortage.

Plans to build two new chip factories in Europe were announced Tuesday by Intel Chief Executive Pat Gelsinger (pictured), the Wall Street Journal reported. He said the company could potentially expand the sites further, if required, in order to cater to skyrocketing demand for semiconductors in everything from computers and smartphones to cars and gadgets.

“This new era of sustained demand for semiconductors needs bold, big thinking,” Gelsinger said during an auto-industry event in Munich.

Chipmakers have been responding to the semiconductor supply crunch by announcing huge outlays to build more manufacturing facilities to meet increased demand. Earlier this year, Taiwan Semiconductor Manufacturing Co., which is the world’s largest contract chip maker, said it will spend $100 billion in the next three years to boost its production capacity. Meanwhile, Samsung Electronics Co. Ltd. said last month it will invest $205 billion in “strategic industries” over the next three years, including semiconductors.

Intel has previously said it will spend $20 billion to build two new plants in Arizona. It’s also committing an additional $3.5 billion to expand one of its existing facilities in New Mexico.

Intel’s proposed investment in Europe is partly tied to its desire under Gelsinger to become a contract manufacturer for other companies, such as the smartphone chipmaker Qualcomm Inc. and the cloud computing firm Amazon Web Services Inc. As part of that push into contract manufacturing, Intel has been active in trying to court European customers, including automotive firms.

The automotive industry is there for the taking as most car manufacturers are desperate for chips. Automakers have been especially hard-hit by the semiconductor crunch, with the likes of Ford Motor Co. and General Motors Co. last week saying they will have to halt some production lines due to a lack of chips. Japan’s Toyota Motor Corp. meanwhile has announced it will slash its global production by 40%.

Gelsinger said Intel is planning to commit some manufacturing capacity at one of its factories in Ireland to automotive chips. At the same time, it is also establishing a chip design team to help customers adapt their semiconductor blueprints so they can be made at Intel’s facilities.

The CEO told participants at the Munich event that demand for automotive chips is expected to double by the end of the decade. As cars become increasingly more connected, semiconductors will account for as high as 20% of the material costs of a new premium-segment vehicle, up from 4% today, thanks to features such as driver assistance systems, touch screens and more.

Intel’s push into Europe is a strategic move. In their desire to become less reliant on other nations for computer chips, European politicians have pushed for some big subsidies to entice companies such as Intel to invest there. Europe’s goal is to increase its share of global chipmaking capacity to 20% in the next decade.

Charles King, an analyst with Pund-IT Inc., told SiliconANGLE building factories in Europe makes sense for Intel because semiconductor manufacturers require a lot of support from the communities where their fabs are built, and that many of their workers need sophisticated skills.

“What’s more important than the total amount of cash Intel plans to spend on this effort are the locations it’s investing into, in the US and EU,” King said. “Broadly speaking, Intel appears to be working to actively repatriate jobs to areas that were once, but are no longer, major tech manufacturing players.”

“That’s certainly important for the communities and people involved. However, with China actively expanding its position and influence across areas in Asia that produce most of the world’s semiconductors, Intel’s efforts could have significant geopolitical consequences,” he added.

Analyst Holger Mueller of Constellation Research Inc. said Intel’s investment in Europe also caters to the fact that millions of potential customers live there. “Now it is all about timing and execution, as announcements are easy, execution harder,” he said. “We will have to see where the first locations are and when Intel will be able to provide production quality chips there.”

“With the global semiconductor shortage and fears about the risk of having most fab capacity in Taiwan, China and South Korea, the trend will be to have more in North America and the EU,” said analyst Patrick Moorhead of Moor Insights & Strategy. “Back in March, Intel indicated it would increase investment in North America and the EU and this announcement answered the EU part of the equation.”

Gelsinger in recent weeks has met with several top EU politicians in Brussels and in other nations, trying to win financial support for Intel’s expansion. Intel wants subsidies to make building a European plant more competitive versus Asia, where governments already offer big financial inducements.

Photo: SiliconANGLE