On January 21, Intel (NASDAQ: INTC) announced plans to invest $20 billion in the construction of two plants in Ohio. According to Randir Thakur, Senior Vice president of Intel, who heads the Intel Foundry Services direction, the new production site will specialize in the production of advanced chips, in particular products of the "extreme era": Intel 20A and Intel 18A solutions (equivalents of 2-nm and 1.8-nm chips from TSMC). These production facilities will become the basis for the creation of a mega-factory, which may include up to eight chip manufacturing plants with a total cost of about $ 100 billion. It is possible that this new Intel project will be partially funded by the $52 billion support program for national semiconductor manufacturers that has been under discussion since last year.
According to Intel's release, the construction of factories in Ohio will allow to implement the IDM 2.0 strategy and expand production capacity for third-party Intel Foundry Services customers, as well as increase capacity for the production of its own products. The company expects that construction will begin at the end of 2022, and production will be launched in 2025.
Taking into account the previously announced investment projects in Europe ($29 billion) and the expansion of production facilities in Malaysia ($7.1 billion), we can talk about a change in Intel's strategy. We believe that the semiconductor elements produced at the Ohio factory can be used to load new packaging plants in Malaysia, which in total can provide $4-5 billion in additional revenue, provided the production capacity is fully loaded. Thus, taking into account the planned expansion in Europe (the company has not yet provided details of this program), we can say that Intel creates a solid (up to $ 12-13 billion) potential to increase revenue in the future. The main obstacle to the implementation of this program may be Intel's extremely ambitious plan to develop products based on the most modern nodes (Intel 20A, Intel 18A).
We believe that during the quarterly presentation Intel may disclose additional details of future investment projects. We keep the target price for INTC paper at $62.