New Albany, Ohio – Intel may soon reveal plans to seek external customers for its manufacturing operations, or potentially halt all production in Ohio.
Recently, Intel disclosed it would further delay progress on a $28 billion manufacturing facility in Licking County. The company indicated that if it cannot find external customers for its new manufacturing technology, known as 14A, it might need to cease operations in Ohio altogether. This technology isn’t expected to launch until 2027, so Intel still has time to attract the necessary clients.
Why is 14A significant for Ohio?
To grasp the importance of 14A, it helps to know how Intel is structured. The company has two primary divisions: Intel products, which handle the design and sale of physical items, and Intel Foundry, which focuses on manufacturing. Intel treats these divisions as separate entities involved in semiconductor production.
Semiconductors, often the size of fingernails, are notoriously challenging to produce. Intel Foundry develops what’s known as process nodes, which are essentially detailed “recipes” that outline the processes and materials required to make semiconductor chips.
These nodes are judged based on their power efficiency, performance, and the space they occupy. The best nodes minimize power use and area while maximizing performance, all at a manageable cost. Although 14A is still in development, Intel is optimistic about its potential.
Intel Foundry generates revenue by selling these “recipes” to customers. While its largest client is Intel products, the company has acknowledged that to keep the Foundry division afloat, new external customers are essential. In its latest financial report, Intel candidly mentioned that the absence of external customers for the 14A technology could lead to the shutdown of operations in Ohio.
Can Intel attract those customers?
CEO Lip-Bu Tan believes that securing external clients for 14A is feasible but hinges on building trust. However, Intel has struggled to draw in outside business so far. Even specifications for products might end up being manufactured by others instead of Intel Foundry. This division is often seen as a competitor to external manufacturing firms, complicating efforts to win them over.
From an outside perspective, it’s understandable for potential clients to hesitate, concerned that Intel may prioritize its in-house production over any external work due to competition.
To address these issues, Tan aims to cultivate trust and learn from past challenges related to existing process nodes. He asserts that Intel’s established reputation in the tech world will help maintain its competitiveness as a manufacturer. Since his appointment in March, Tan has engaged with several Intel customers to understand their needs better.
An Intel spokesperson reiterated the company’s commitment to the Ohio project, acknowledging the slowdown in construction. Tan has restructured Foundry to better align with market demands instead of taking a proactive approach. He indicated that Intel will invest in its Ohio factory only if it sees a clear market opportunity in the future.
What if Intel can’t acquire customers?
If Intel fails to attract external clients for 14A, the company has stated it is “highly likely” to terminate all operations in Ohio, significantly impacting its foundry plans. This would come at a steep cost, as Intel has only a couple of other semiconductor manufacturers capable of producing the necessary products, and relying solely on them can be pricey.
Backing out of commitments made in Ohio and beyond would also have serious financial ramifications. Intel has estimated its investments in real estate and equipment at over $100 billion, which would be lost upon shutting down foundries. Moreover, the company would have obligations to repay the state of Ohio and the federal government for financial incentives received for establishing a semiconductor chip plant in New Albany.
In November 2024, Intel inked a deal with the US Department of Commerce for $7.9 billion, with $1.5 billion specifically allocated for Ohio. This funding comes from the bipartisan Chips Act aimed at boosting domestic semiconductor manufacturing.
Even so, Intel mentioned that it has yet to receive all payments it submitted under the Chips Act. So far, they have received $2.2 billion, with earlier amounts disbursed before the current administration. Intel has put in a new request for $855 million in funding between April and July but remains uncertain about the outcome.
Intel has pulled back on or merged most of its semiconductor expansion projects in other countries while reaffirming its commitments to Ohio. Given the unavailability of 14A for the next couple of years, construction in Ohio is likely to proceed slowly until there’s clearer visibility on the future of 14A. Intel hasn’t provided an updated timeline reflecting the project’s delays.
