Intel Chief Says Taiwan Instability Calls For Subsidies To American Chip Makers

Ramish Zafar
During recording of the “Intel Unleashed: Engineering the Future” webcast, Intel CEO Pat Gelsinger highlights "Ponte Vecchio," Intel's first exascale graphics processing unit. During the webcast on March 23, 2021, Gelsinger outlines the company’s path forward to manufacture, design and deliver leadership products and create long-term value for stakeholders. (Credit: Walden Kirsch/Intel Corporation)

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Intel Corporation's chief executive officer Mr. Patrick Gelsinger stressed the need to support American companies in the ongoing push to develop a sustainable semiconductor supply chain in the United States. The executive made his comments at the Fortune Brainstorm Tech Conference held in Half Moon Bay, California, with the statements coming in the wake of Korean giant Samsung Group's decision to build a $17 billion semiconductor fabrication facility in Taylor, Texas.

Intel Chief Outlines Significant Subsidies For Chip Firms In Taiwan And Korea As Driving Factor For Semiconductor Industry Growth

Details of his talk at the event, reported by The Nikkei Asian Review, stressed the need to develop American firms that are capable of competing globally when it comes to manufacturing advanced semiconductors. Mr. Gelsinger believes that by supporting firms like Micron Technology, Texas Instruments and Intel, the United States government can ensure that precious intellectual property (IP) related to chip fabrication stays within the country. According to him, the geopolitical fragility of Taiwan necessitates the need to have reliant chip IP based inside the U.S.

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As he outlined:

"Do you want to own the IP, the R&D, and tax stream associated with that or do you want that going back to Asia?"

The Intel executive also shared concerns regarding the geopolitical situation in Taiwan. The island, home to the Taiwan Semiconductor Manufacturing Company (TSMC), recently witnessed 27 warplanes from the People's Republic of China enter its air defense buffer zone, an event that seemed to be on Mr. Gelsinger's mind as his comments quoted by The Nikkei outlined:

"Taiwan is not a stable place," said Gelsinger, adding that Beijing sent 27 warplanes to Taiwan's air defense identification zone this week. "Does that make you feel more comfortable or less?"

TSMC is the world's leading contract chip manufacturer, which means that it is responsible for supplying firms with semiconductors built using its own technologies but their designs. The company is currently mass producing its 5-nanometer (nm) chip manufacturing node, which is amongst the most advanced in the world.

Mr. Gelsinger at the Fortune Brainstorm Tech conference yesterday. Image: Future Brainstorm Tech

He also decried the lack of subsidies in America for chip companies when compared to their Asian counterparts in South Korea and Taiwan. According to him, the high subsidies mean that Intel is not competing with companies, but with countries.

Mr. Gelsinger bemoaned that:

"How do you compete with a 30 to 40% subsidy? Because that means we're not competing with TSMC or Samsung, we're competing with Taiwan and Korea. The subsidies in China are even more significant."

Both Samsung and TSMC have received subsidies from U.S. states to build their facilities inside CONUS. Samsung's $17 billion chip plant can fetch as much as $4 billion, while TSMC's $12 billion facility in Arizona is aided by the Pheonix City Council through $205 million in spending to improve infrastructure.

The Brainstorm Tech Conference wasn't the first time Gelsigner stressed on the importance of subsidies for one of the world's largest chipmakers. Intel, which announced a $20 billion investment in Ocotillo, Arizona earlier this year to expand and develop its contract chip manufacturing capabilities, was yet to receive any relief from the U.S. government as of April end this year.

However, the company's boss remained optimistic about the future, sharing that he expected Congress to pass the crucial CHIPS for America Act by the end of this month. This Act, if enacted alongside an amendment to the Endless Frontier Act,  will see companies receive as much as $3 billion for individual projects; funding which is integral for the $4 billion in estimated subsidies for Samsung's plant mentioned above.

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