Pat Gelsinger on the Future of U.S. Chipmaking: Innovation is Key

Former Intel Corp CEO Pat Gelsinger has emphasized that to regain its status as a leader in chipmaking, the United States needs more than just significant financial investments; it fundamentally requires a focus on bringing core innovations back to American soil.

What Happened: In a recent interview, Gelsinger stated that Taiwan Semiconductor Manufacturing Company’s TSMC $100 billion investment to boost chip production in the U.S. is a positive move but ultimately not enough, as reported by the Financial Times.

He remarked, "If you don't have R&D in the U.S., you will not have semiconductor leadership in the U.S." He pointed out that most of TSMC's research and development takes place in Taiwan, and no plans have been announced to shift that focus.

Now a partner at the deep-tech venture capital firm Playground Global, Gelsinger noted that former President Donald Trump's tariffs have had an "incrementally beneficial" effect by encouraging companies like TSMC to make investments in the U.S. However, he cautioned that without relocating essential research operations, the U.S. would continue to depend heavily on foreign entities. Gelsinger stated, "Unless you're designing the next-generation transistor technology in the U.S., you do not have leadership in the U.S."

Why It's Important: Both the Biden and Trump administrations have aimed to lessen the country’s reliance on international chip supply chains.

TSMC's push to expand in the U.S. is reportedly motivated by geopolitical pressures, the need for supply chain security, and specific demands from customers. Nevertheless, experts warn that this expansion could pose significant risks for Taiwan, as ongoing threats from China have highlighted the need for Taipei to plan beyond its "Silicon Shield."

Additionally, the Taiwanese government has been scrutinizing TSMC's overseas projects, indicating that any joint ventures abroad must receive official approval.

In a previous development, TSMC proposed a joint project with U.S. chip firms Nvidia Corp., Advanced Micro Devices (AMD), and Broadcom Inc. (AVGO) to operate Intel's manufacturing facilities.

During the interview, Gelsinger was hesitant to discuss any potential disagreements with Intel's board regarding strategic direction, suggesting that he had lost their confidence before finalizing his five-year agenda. He stated, "I wasn't done with the five-plus years when the board made a directional change."

Recent reports highlight that Intel's new CEO, Lip-Bu Tan, is planning significant restructuring, which may include employee reductions to address what he sees as an inefficient middle management layer.

Price Action: Following news of these developments, TSMC's stock experienced a slight decline, dipping 0.40% in after-hours trading to $172.81, down from a close of $173.50 earlier in the day. Year-to-date, TSMC shares have seen a decrease of approximately 13.93%, according to market data.

Overall, as the semiconductor industry navigates these challenging waters, the focus on core innovation and domestic research will be crucial for the U.S. to reclaim its leadership position in chipmaking.

Intel, chips, innovation