Intel is betting big on car chips with its new auto foundry unit

• Intel launched a new auto foundry unit following its decision to buy Israeli chip manufacturer Tower Semiconductor for US$5.4 billion.
• The company will continue looking for more M&A targets to fuel expansion.
• Intel also plans on increasing capital spending in the next few years to boost the organic growth of its foundry business.

The global semiconductor shortage has impacted a vast majority of industries worldwide — but one sector that is still being hit particularly hard is the automotive market. Seeing how demand for automotive silicon is skyrocketing, chip giant Intel Corp decided to create a chipmaking unit under its foundry business to focus on car chips.

In fact, since April 2021, Intel’s CEO Pat Gelsinger has been sharing about the company’s plans to start producing chips for automakers to help alleviate a shortage that has disrupted vehicle production around the world. Gelsinger has, prior to this, emphasized that it will dedicate production at its plant in Ireland for the manufacture of chips for automakers. 

That said, in the recent annual investors meeting two weeks ago, Gelsinger finally announced a new division to design and sell chips that will help carmakers modernize vehicles and the processors that power them. He reckons that the demand for automotive chips is expected to nearly double to US$115 billion by 2030.

The automotive unit could well be a new challenge to rivals Nvidia and Qualcomm, according to industry pundits. It is also a part of the Intel Foundry Services division, one of the major efforts Gelsinger adopted to try to reverse Intel’s slide off the leading edge of chipmaking.

President of Intel Foundry Services Randhir Thakur, during the same event, said that “The automotive market is going through an inflection, supply chains are being disrupted, electric and autonomous vehicles are requiring new semiconductor solutions.

Additionally, just before the annual investors event last month, Intel announced that it has bought the Israeli semiconductor production company Tower Semiconductor for US$5.4 billion.The purchase is basically one of the moves that Intel is preparing to reinforce its relevance as a manufacturer of chips for the car industry.

According to Intel CFO Dave Zinsner during the investor’s event, the company will continue looking for more M&A targets like Tower Semiconductor to fuel expansion, in addition to increasing capital spending in the next few years to boost the organic growth of its foundry business. “We just have a belief more than anything, that [foundry] is a business that we should be in,” Zinsner said, based on Nikkei’s report.

The California-based chipmaker currently has a facility in County Kildare in Ireland that has been used for manufacturing its mainstay computer processors. It plans to convert an unspecified amount of that plant’s output to producing other companies’ designs aimed at the automotive industry, Gelsinger said last year.