Intel has struggled to shrink circuitry, key to making processors competitive and profitable.

Stephen Shankland

Intel on Monday plans to announce a $3.5 billion upgrade to a chip manufacturing plant in Rio Rancho, New Mexico. That spending, combined with $20 billion to build two new facilities in Arizona, is part of a major effort by Intel to rejuvenate its manufacturing.

The chipmaker on Sunday confirmed the $3.5 billion upgrade plan, first reported on CBS’ 60 Minutes. Intel manufacturing chief Keyvan Esfarjani will detail the plan at a press conference with New Mexico Gov. Michelle Lujan Grisham, New Mexico’s two senators, Martin Heinrich and Ben Ray Luj├ín, and Rep. Teresa Leger Fernandez, Intel said.

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Intel is happy with current political efforts to drum up federal funding to help the US chip industry. New CEO Pat Gelsinger said Intel will invest more of its own money, too, instead of spending it on buying its own stock, which keeps shareholders happy but doesn’t help research or operations.

“We will not be anywhere near as focused on buybacks going forward as we have in the past,” Gelsinger told 60 Minutes. “That’s been reviewed as part of my coming into the company, agreed upon with the board of directors.”

Appeasing shareholders was important as Intel struggled, Moor Insights and Strategy analyst Patrick Moorhead tweeted Monday. “If they didn’t do buybacks I think the company would have been broken up,” Moorhead said. One widely suggested remedy for Intel’s woes has been to split its chip design business, which comes up with processors like its Core and Xeon models, from its chip manufacturing business.

Intel led chipmaking progress for decades but fell behind Taiwan Semiconductor Manufacturing recent years. Investing in its new chipmaking plants, called fabs, is part of a major Intel effort to restore its competitiveness under Gelsinger. The company is also planning to build chips for others, a business called a foundry, and to rely on other chip foundries to build some of its own chips.

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The Silicon Valley company remains profitable, but it faces stiff competition on several fronts besides TSMC and the third major chipmaker, Samsung. All smartphone processors are members of the Arm family, including Apple‘s A series. Apple also has split from Intel for its new M series of Mac processors. Amazon, meanwhile, has an Arm server processor for its Amazon Web Services, the cloud computing foundation that powers huge swaths of the internet.

Intel also faces a smaller Arm rival called RISC-V that’s won interest from some notable chip startups. One, Tenstorrent, hired Jim Keller, formerly a high-profile Intel chip designer, as chief executive. Another, Esperanto Technologies, has revealed an AI chip design with more than 1,000 processing cores.

TSMC is spending billions of dollars on its new fabs, too, mostly in Taiwan but also in Arizona. Gelsinger is bullish, though: “We believe it’s gonna take us a couple of years and we will be caught up,” he told 60 Minutes.

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