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USAToday Column
October 2, 2020 Many people still think of the tech industry as being relatively young, including those companies involved with making semiconductor-based chips at the heart of all our digital devices. The reality, however, is that some of the more established tech businesses have been around for more than half a century. Chip industry leader Intel is now over 52 years old and is celebrating 40 years of manufacturing at its various facilities in Arizona. The news is particularly appropriate for today, because the first Friday in October is U.S. Manufacturing Day. In honor of the day and the company’s efforts, I had an exclusive opportunity to chat with Intel CEO Bob Swan about the critical importance of high-tech manufacturing in the U.S., as well as the role of technology overall in modern society. As Swan noted at the beginning of our conversation, “Today, virtually everything looks like a computer, whether it’s a PC, phone, car, server, factory, or hospital. That reality reinforces the need for more data. In a directly related way, this insatiable appetite for data in the world is driving digital revolutions across every industry.” The drive toward digital Indeed, from grocery stores to guitar factories and elementary schools to electric utilities, there is hardly a single industry or organization that hasn’t been somehow digitized and/or dramatically transformed by technology. The pandemic has accelerated these trends much faster than anyone predicted. It is now abundantly clear how dependent on technology we’ve all become. “These trends are going to accelerate moving forward,” Swan added, “and that will require even more technology.” Along with the need for technology-based products, of course, is a means to manufacture them. At Intel’s Ocotillo, Arizona-based Fab 42 (Fab is short for fabrication facility – a common term for a factory in the chip business). The company recently completed the production line for its latest generation 10nm (nanometer) chips. (Nanometer refers to the size of the individual elements in a chip and 10nm is 10 billionths of a meter wide – that’s roughly 8,000 times smaller than the width of a human hair.) These chips have started making their way into the latest PCs, servers, and data centers that power the internet-based services, like Netflix and Amazon, that we all rely on. As critical as these types of chips are, however, the quantity of them that are produced in the U.S. has slipped dramatically from just a few decades ago. (See my previous column "Why US-based semiconductor chip manufacturing is critical" for more.) Like many other industries, chip manufacturing has largely moved offshore, but the combination of recent geopolitical concerns and the pandemic has made many people across government and industry realize how important it is to start reversing that trend. As Swan notes, “It’s time to engage in a constructive way to protect the U.S. industrial base, as well as national security.” Part of the issue is that in several other countries – notably China – the government subsidizes the extremely high costs (typically $5 billion or more per factory) for new chip manufacturing sites. As a result, says Swan, “The U.S. government needs to provide incentives to level the playing field for US companies.” The incentives can help provide more high-paying tech jobs – Intel employs 3,000 in Ocotillo, 12,000 in Arizona, and 53,000 across the U.S. – but even more importantly, help keep the US’s lead position in technology-focused research and development. Moving ahead won’t be easy though, as Intel is now only one of two remaining companies (memory chip maker Micron is the other) that both design and produce their chips in the U.S. Most other major U.S. chip and tech companies are called “fabless,” meaning they design their chips but have them manufactured elsewhere. In a major strategic shift, Intel has recently started talking about building chips for others using its U.S.-based facilities. According to Swan, “We will entertain building chips for others to maintain supply chains.” New developments, new opportunities The reality is that, even with government incentives, it is going to be very difficult for new companies to enter the traditional chip manufacturing market in the U.S. because of the enormous barriers to entry. However, there are some interesting new developments in how chips are being built that could provide an opening. Instead of building an entire chip in a single step, there has been a great deal of development – including some innovative new concepts from Intel, AMD, and others – in putting together a number of smaller “chiplets” for a finished whole. In this type of scenario, individual elements could be made by Intel and/or others and then packaged together to form a finished product. As Swan describes, “As we move to more disaggregated chip designs, the ability to combine different elements together becomes more important. Advanced packaging technologies that enable this will play a much more important role in the future.” Plus, he adds, “Compared to building a fab, it’s more realistic for other companies to achieve.” The U.S.’s leading role in semiconductor design – driven by Intel, as well as the big fabless chip makers like Nvidia, AMD, Qualcomm, Broadcom, Marvell, TI and others – is as strong as it has ever been. However, as domestic manufacturing in the semiconductor industry has slipped, the fundamental need to be able to build a larger portion of those products here is now more important than ever. That’s why it’s nice to be able to stop and acknowledge what Intel has achieved in Arizona, Oregon, and other states around the country. On this day that celebrates manufacturing in the U.S., however, it’s also important to recognize that there’s still more work to be done. Here’s a link to the original column: https://www.usatoday.com/story/tech/columnist/2020/10/02/u-s-manufacturing-intel-tech-revolution-covid-impact/5880500002/ USA TODAY columnist Bob O'Donnell is the president and chief analyst of TECHnalysis Research, a market research and consulting firm that provides strategic consulting and market research services to the technology industry and professional financial community. His clients are major technology firms including Microsoft, HP, Dell, and Intel. You can follow him on Twitter @bobodtech. |
