Washington likes Intel's new plan.
Good morning.
New Intel CEO Pat Gelsinger created a brief bump in his company’s stock yesterday, after laying out his plan for reviving the struggling chip firm. It didn’t last long. After opening up 5%, the stock promptly fell back and closed 2% below the previous day’s close.
But if the markets were cool, the reception in Washington was considerably warmer. Gelsinger committed to a major expansion in what he called “geographically balanced” manufacturing capacity—meaning “not in Asia.” The commitment starts with a $20 billion investment to build chip plants in Arizona in partnership “with the state of Arizona and the Biden administration.” The company is also competing for a major award from the Defense Department.
The point here is clear. Semiconductors have emerged as the new oil, and Intel is making a bid to become America’s national champion. Taiwan-based chip maker TSMC is also building a new fab in Arizona and making a play for U.S. government support. But that’s complicated, in the eyes of Washington policy makers, by the fact that China claims Taiwan as its territory. The language of Chinese leaders on Taiwan allows “no room for compromise,” former World Bank President Robert Zoellick told members of Fortune’s CEO Initiative this week. Taiwan “is a special point of danger in the months ahead.”
Former Intel CEO Andy Grove is famed for making the decision in 1985 to take his company out of the memory chip business in order to focus on higher value chips. That was an iconic example of a company “disrupting itself”—and also a major step in the globalization of the semiconductor business. Gelsinger’s announcement is a signal that a new age has begun, with U.S. government and business teaming up to bolster U.S. competitiveness in a key industry to counter the Chinese threat.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
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This edition of CEO Daily was edited by David Meyer.
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