Sherrod Brown took credit for Intel’s much-hyped plant in Licking County. But now the project, beset by delays, is in jeopardy. Intel failed a critical production benchmark that sent its stock into a tailspin and sparked fears it would sell off some chip-making capacities.
Intel’s most advanced chip-making process, “18A,” was set to drive manufacturing at its Ohio facility. But 18A chips failed testing with a customer, and now the company is in freefall.
Intel’s 50% dive in market capitalization this year could see the company delisted from the Dow-Jones altogether — and the fate of its proposed Ohio semiconductor manufacturing facility in question.
The Story
First, Intel announced delays in Ohio on the heels of CHIPS Act headwinds in Congress. WCMH in Columbus reported:
The New Albany plant recently saw supply “super loads” delivered over the course of the summer. While that was indicative of Intel’s commitment to finishing “Silicon Heartland,” the company also confirmed it wouldn’t meet a target to be up and running by February 2025. Instead, Intel forecasted a time between 2027 and 2028. Farther back in 2022, Intel delayed the groundbreaking of the Ohio plant as it waited for Congress to pass the CHIPS Act and net federal funding for the project.
DEI & A Crippling U.S. Regulatory Environment
Then, Diversity, Equity, and Inclusion provisions hobbling the CHIPS Act, that would have required minority hiring quotas, sent jitters into semiconductor manufacturers looking for better regulatory environments in Japan, Ireland, and Germany.
According to Matt Cole, Chief Investment Officer at Dublin-based Strive Asset Management, the bill’s DEI provisions will hobble U.S. competition on the global stage as China flexes its muscles in the Taiwan Strait. Cole wrote in The Hill:
The law contains 19 sections aimed at helping minority groups, including one creating a Chief Diversity Officer at the National Science Foundation, and several prioritizing scientific cooperation with what it calls “minority-serving institutions.”
A section called “Opportunity and Inclusion” instructs the Department of Commerce to work with minority-owned businesses and make sure chipmakers “increase the participation of economically disadvantaged individuals in the semiconductor workforce.”
The department interprets that as license to diversify. Its factsheet asserts that diversity is “critical to strengthening the U.S. semiconductor ecosystem,” adding, “Critically, this must include significant investments to create opportunities for Americans from historically underserved communities.”
The department does not call speed critical, even though the impetus for the CHIPS Act is that 90 percent of the world’s advanced microchips are made in Taiwan, which China is preparing to annex by 2027, maybe even 2025.
Sen. Sherrod Brown proudly claimed credit in March of this year for the CHIPS Act’s passage, after it appeared the plant would move forward after a fresh round of delays over the winter.
Brown spent the week of Intel’s freefall campaigning with black leaders in Cincinnati. Hamilton County Commissioner Alicia Reece said at the event, “it’s important to me that our elected officials are fighting for the best interests of Ohio’s Black communities,” according to the Cincinnati Herald.
Hobbled by stiff regulatory and DEI provisions or not, the plant, and with it, the purpose of the CHIPS Act, may yet prove to be a dead letter.
Intel’s manufacturing capacity in question
This week, Intel’s failure to actually deliver functional microchips to a customer sparked fears the computing giant cannot deliver in chip manufacturing more broadly.
Apparently, Intel’s dream of becoming a chip foundry is not working out so well, as recently-tested chips at Broadcom AVGO -0.84% ▼ did not go according to plan.
The failed chips Intel supplied to Broadcom apparently used Intel’s most advanced “18A” manufacturing process, which was slated to drive its Ohio facility.
Intel failing Broadcom’s testing sent the stock nosediving. Analysts expect Intel will be delisted from the Dow-Jones Industrial Average stock index. The company had already announced 15,000 layoffs, 15% of its global workforce, earlier this month.
It remains to be seen whether the company’s 18A chips can be brought to the standards needed to compete.
Ohio Stakes
Ohio’s loss of manufacturing capacity in the generation since its automotive prowess faded with NAFTA has left the state with the 42nd worst economy in the nation. The Intel facility promised 3,000 high tech manufacturing jobs, several thousand more construction jobs, and potentially tens of thousands of additional supporting jobs surrounding the growth.
Should the project ultimately fall through, Ohio has state incentive skin in the game in the form of $600 million worth of state grants. According to WCMH, Intel would be on the hook for state and federal monies.
The parties agreed Ohio could stop payments to Intel and claw back what it already gave if the company did not hold up its end of the bargain. But another $691 million was earmarked for infrastructure investment like a new water reclamation facility for the New Albany plant. This portion would have its own clawback mechanism in a separate agreement, but would leave structures standing for naught with a canceled project.
Gov. Mike DeWine expressed confidence the plant would continue.
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