The explosive announcement by Intel Corp. that it could outsource its chip manufacturing when necessary has sent ripples through the semiconductor industry, triggering a 16% drop in shares of the U.S. tech giant on Friday. It is still unclear how the announcement will affect Intel’s activities in Israel, where it has manufacturing and R&D operations and is the country’s largest private-sector technology employer, with nearly 14,000 workers.
Santa Clara, California-based Intel is the world’s largest semiconductor maker and has spent tens of billions of dollars over the years to upgrade its manufacturing facilities worldwide. The company’s management has touted its in-house chip manufacturing, which powers everything from laptops to data centers, as one of its key advantages compared to competitors, managing to attract top talent and generate economies of scale.
While other semiconductor firms have switched manufacturing to component manufacturers, primarily in Asia, so far Intel has done most of its in-house manufacturing, with many of its factories still in the United States.
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Announcing the company’s second-quarter financial results, Intel CEO Robert Swan said the company’s new 7-nanometer chip technology was delayed by about six months, and that it would consider outsourcing some of the work to foundries at external semiconductors.
Intel’s new CEO Robert Swan, who was named chief executive of the technology firm on January 31, 2019. (Credit: Intel Corporation)
“We are seeing an approximate 6-month change in time for our 7-nanometer-based CPU product from previous expectations,” Swan said in a conference call with analysts, according to an edited transcript. “We have identified a defect mode in our 7nm process that resulted in performance degradation. We have caused the problem at the root and we believe that there are no fundamental obstacles, but we have also invested in contingency plans to protect against further uncertainty on the calendar. ”
“Our overall priority is to provide product leadership for our customers, and we are taking the right steps to produce a strong line of leadership products,” said Swan. “We will continue to invest in our future process technology roadmap, but we will be pragmatic and objective in implementing the process technology that offers the highest predictability and performance for our customers, be it in our process, external casting process or a combination of both. ”
“We are going to be quite pragmatic about whether we should do things inside or out and make sure that we have the ability to build internally, mix and match inside and out, or go out entirely if necessary,” he added.
The Haifa team at Intel Corp has developed the new 10th generation Intel Core processors that bring AI to the PC for the first time (Courtesy)
Israel is home to the world’s largest Intel development center, and the Israeli team’s contribution to the company’s global technological development is considered significant. The seventh and eighth generation Intel processors were primarily developed in Israel. The firm’s Kiryat Gat factory is considered one of the most advanced and highest-quality among Intel factories worldwide.
The US firm employs 13,700 workers in Israel: 7,300 in development and 4,900 in manufacturing. There are 1,350 additional workers employed at Mobileye, the Jerusalem-based autonomous technologies company that Intel bought for a whopping $ 15.3 billion in 2017.
Intel indirectly employs some 53,000 workers in Israel. The company’s local activities accounted for $ 6.6 billion in exports in 2019, consisting of 12.5% of Israel’s high-tech exports and approximately 1.6% of Israel’s GDP.
A person familiar with the industry said it was not yet clear how the decision will affect the company’s operations in Israel, but said it is not expected to have a major effect on local operations at this time.
When asked about the impact of Swan’s comments on Intel’s operations in Israel, Intel Israel said in a text message: “Israel is one of Intel’s global R&D and manufacturing centers, with operations like ours Kiryat Gat wafer manufacturing plant, computing, communications and artificial intelligence R&D equipment. Through Israel and Mobileye headquarters in Jerusalem. We continue to invest in these operations. “
In 2019, Intel said it was expanding its operations in Israel by investing nearly $ 11 billion in a new plant at the Kiryat Gat manufacturing site. Also in 2019, Intel acquired Habana Labs, and in 2020, it purchased the smart transit startup Moovit for $ 900 million.
“While we have not announced any specific new projects since we introduced our business plan in January 2019,” Intel’s statement continued, referring to plans to expand its Kiryat Gat facility, “additional details on the steps we are taking. to prepare our global manufacturing. The network for our future needs can be found in this December (2018) post, ”the company said.
The company has a hardware and software development center for artificial intelligence chips and processors in Haifa, a development center for communication and artificial intelligence solutions in Petah Tikva, and a global autonomous car development center in Jerusalem.
Mooly Eden (Courtesy)
Mooly Eden, former president of Intel Israel, said in a phone interview that he has “no visibility” of recent Intel activities, but added that he believes things “will be fine for Israel” and that he is not “hysterical” about the news .
If Intel decided to cut manufacturing activities, he said, it would likely be the older manufacturing plants that would be at risk.
“The ‘fabulous’ at Kiryat Gat is very new and therefore I don’t expect significant problems,” he said. “In general, the old fabs are closed, not the new ones.”
There could be changes and cuts in local activities, at the micro level, he said. “These are small tactical problems. But overall, I don’t think “the Kiryat Gat facility” is in jeopardy. “
