The White House spurned a plan by Intel Corp to increase production in China over security concerns, dealing a setback to an idea pitched as a fix for US chip shortages, people familiar with the deliberations said.
Intel, the world’s largest chipmaker, has proposed using a factory in Chengdu, China, to manufacture silicon wafers, said the people, who asked not to be identified because the discussions were private.
That production could have been online by the end of next year, helping ease a global supply crunch, but at the same time, Intel has been seeking federal assistance to ramp up research and production in the US.
When presented with the plan in the past few weeks, officials in US President Joe Biden’s administration strongly discouraged the move, the people said.
The situation underscores the challenges of the chip shortage, which has hobbled the technology and auto industries, cost companies billions in lost revenue and forced plants to furlough workers. The Biden administration is scrambling to address constraints, but it is also trying to bring production of vital components back to the US — a goal Intel’s China plan did not serve.
Intel said in a statement that it remains open to “other solutions that will also help us meet high demand for the semiconductors essential to innovation and the economy.”
“Intel and the Biden administration share a goal to address the ongoing industry-wide shortage of microchips, and we have explored a number of approaches with the US government,” the company said.
“Our focus is on the significant ongoing expansion of our existing semiconductor manufacturing operations and our plans to invest tens of billions of dollars in new wafer fabrication plants in the US and Europe,” it said.
The episode comes as the White House is debating whether to restrict certain strategic investments in China.
A representative for the White House declined to comment on specific transactions or investments, but said the administration is “very focused on preventing China from using US technologies, know-how and investment to develop state-of-the-art capabilities.”
Like other chip companies, Intel is eagerly waiting for the US Congress to pass US$52 billion in funding for domestic research and manufacturing. That proposal, called the CHIPS Act, has been lingering in the US House of Representatives for months.
Following deliberations with the Biden team, Intel has no plans to add the production in China at the moment, a person familiar with the decision said.
Still, such scenarios could arise again, and the Biden administration might need to decide what rules come attached to the grant money.
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