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Intel’s $20 billion investment in Ohio chip factories said to be the state’s largest ever

The California tech giant’s first big bet in the Midwest is described as a way for the state to shake off its Rust Belt moniker. Silicon Heartland?

Intel announced Friday that it was building a chip manufacturing campus near Columbus, Ohio, that initially would employ 3,000 people and create thousands more construction jobs. (Andrew Kelly/Reuters)

The White House’s announcement Friday of a $20 billion investment in semiconductor manufacturing marked the administration’s latest effort to combat a global shortage of computer chips that has hobbled manufacturing and fueled inflation.

The commitment by tech giant Intel to build two chip factories in Ohio will dramatically boost domestic supplies of a component that is increasingly vital to nearly every stripe of manufacturing, President Biden and Intel Chief Executive Pat Gelsinger told a news conference.

Construction will begin late this year and finish by the end of 2025. That means that the investment — the largest by the private sector in Ohio’s history, Intel said — will help secure the nation’s long-term chip supply but won’t alleviate the immediate shortages that have forced automakers and other manufacturers to slash production.

The political dimensions of the crisis have vaulted the obscure electronic components to the top of the Biden administration’s economic agenda. A shortage of new and used cars, caused by the chip shortage, has driven up prices and helped fuel overall inflation, a topic expected to dominate the midterm elections this year.

The supply problems have also held back economic growth: The collapse in auto sales to consumers because of the chip shortage shaved more than two percentage points from U.S. gross domestic product growth in the third quarter.

Semiconductor shortage that has hobbled manufacturing worldwide is getting worse

Chips “power, virtually everything in our lives — your phone, your car, your refrigerator, your washing machine, hospital equipment, the Internet, the electric grid and so much more," Biden said during Friday’s event, which was at least the third chip-focused summit at the White House in the last year.

The two new factories near Columbus will create 3,000 Intel jobs and about 7,000 construction jobs, the company said, adding that those numbers could grow if Intel opts to continue building out the site, which can accommodate eight chip factories in all.

Intel, headquartered in Santa Clara, Calif., has large factories in Arizona and Oregon, and in several countries around the world, including Ireland and Israel. The Ohio move marks the company’s first big commitment to the Midwest, and is likely to draw additional tech companies to the region, Gelsinger said.

He called the new site the start of "the Silicon Heartland,” a reference to Silicon Valley in California, where many of the largest tech companies are headquartered. The site’s proximity to Ohio State University and its many engineering graduates was a particular draw, he added.

Ohio Sen. Sherrod Brown, a Democrat, said the high-tech investment will “fundamentally remake manufacturing in the Midwest.”

“Today the term Rust Belt is officially buried. Dead and buried,” Brown said in an interview. Much of Ohio in recent decades has suffered an outflow of young people who have left to seek jobs elsewhere, he said. “This will turn that around," he added.

At a separate event in Ohio, Gov. Mike DeWine (R) said an investment of this scale means that “from now on, any company any place that’s thinking about opening a new plant will simply have to give Ohio a good look.”

A massive increase in chip supply will be vital in the coming years as more products become electronic and require computer chips to function, Gelsinger said.

“Ponder for a moment what portion of your life is not becoming more digital," he told the White House news conference. "Education, business, medicine, work from home, learn from home, care from home, infrastructure, national security — all of these depend on chips.”

Biden and Commerce Secretary Gina Raimondo, who also attended the White House event, called domestic manufacturing of chips a matter of national security. In the early 1990s the United States was home to about 37 percent of global chip manufacturing, but that has dropped to about 12 percent in recent years as more production shifted to Asia.

About 75 percent of chip production today takes place in East Asia, and over 90 percent of the most advanced chips are manufactured in Taiwan, Biden noted.

Other large chipmakers also have announced plans to expand in the United States, although some have said the speed of their investments will depend on passage of $52 billion in federal subsidies that have not yet cleared Congress.

The Chips Act, as it’s known, passed the Senate last year but has been held up in the House, though Speaker Nancy Pelosi on Friday said the chamber will soon introduce its version of the legislation and “supercharge our investment in chips.”

Biden, Raimondo and Gelsinger urged Congress to pass the legislation quickly, with Gelsinger saying Intel would accelerate its investment in Ohio if it receives subsidies.

“We are getting started, but this project will be bigger and faster with the Chips Act,” he said.

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Chipmaker GlobalFoundries has said it plans to double production capacity at its facilities in Malta, N.Y., in the coming years if the subsidies come through.

In November, Samsung announced it would spend $17 billion on a new chip factory in Central Texas. Texas Instruments is planning to spend up to $30 billion to expand in Texas, the White House said.

And Intel and Taiwan Semiconductor Manufacturing Company (TSMC) have broken ground on separate factory construction projects in Arizona.

Countries around the world have been lavishing subsidies on semiconductor manufacturers to try to boost output. The plants are among the most expensive manufacturing facilities to build, requiring $10 billion or more of specialized equipment and construction.