Intel spending $7.1 billion on Malaysia chip packaging as it fights global crunch

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Intel spending $7.1 billion on Malaysia chip packaging as it fights global crunch

Intel Corp. is spending $7.1 billion on new chip packaging facilities in Malaysia, a major investment to ramp up its global footprint and address a crippling global chip shortage it expects to persist until 2023.

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The company is earmarking more than 30 billion ringgit to expand its capacity in the country, Chief Executive Officer Pat Gelsinger told reporters on Thursday. He said that part of the new packaging plant will begin production in 2024.

Malaysia is emerging as a global center for testing and assembly of semiconductors. The U.S. chipmaker intends to shore up its capabilities in the island state of Penang, creating a sprawling complex that will serve industries from cars to electronics across Asia.

It is part of the global expansion as Gelsinger moves to stanch market share losses and customer defections stemming in part from stumbles in upgrading technology. In February, Gelsinger took over the helm of the largest American chipmaker, with a mandate to take back leadership of the industry from Asian giants such as Taiwan Semiconductor Manufacturing Co. Intel is planning expansions in the U.S. and Europe next year, he said.

The years of global industry underinvestment and a surge in Covid-era demand for computing devices have created an unprecedented shortage of the semiconductors needed in everything from autos to smartphones. Gelsinger said chip demand climbed 20% during the epidemic and he expects the crunch to last until 2023.

READ: Intel CEO to visit Taiwan for talks Crucial to Turnaround Bid.

Gelsinger visited Taiwan and Malaysia this week for talks that underscored the importance of Asian manufacturing in his turnaround efforts. The trip included plans for a meeting with TSMC leaders, according to people familiar with his schedule.

Intel both needs TSMC's advanced manufacturing services, and plans to compete with the Taiwanese company in the so-called foundry business, a tricky balancing act for the CEO. Intel also operates a plant in Dalian, China, in addition to Malaysia.

This is Gelsinger's first trip to Asia since taking the top job at Intel and comes as he lobbies the U.S. government to allocate money for the country's chip industry to domestic chipmakers. He has argued that overseas manufacturers - such as TSMC and Samsung Electronics Co., which both have plans to build plants in the U.S. - shouldn't get money through the Chips Act, which is going through political approvals in Washington. He argues that the concentration of advanced manufacturing in Asia and Taiwan is a strategic risk.

READ: Malaysia Pushes Tech Hub to Help Economy Ride Out of Pandemic

Malaysia alone accounts for 13% of the world s chip testing and packaging, a key step in the preparation of semiconductors for cars, phones and other devices, and Penang has emerged as the nation's electrical and electronics hub. In 2020, more than half a million people were employed in the E&E industry, working with global chipmakers from STMicroelectronics NV and Infineon Technologies AG to Intel and Renesas Electronics Corp.

Trade Minister Azmin Ali said that the expansion of Intel's facilities in Malaysia will create more than 4,000 jobs for the company as well as more than 5,000 construction jobs for local Malaysians. The pandemic has upended supply and production chains and depressed fundamental demand, as in other manufacturing hubs across the world. Malaysia is keen to keep the local economy humming, as a result of the big-name investment and jobs it needs to climb the tech ladder.

READ: The World s Relentless Demand for Chips is Deadly in Malaysia

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