60 Minutes' Intel CEO interview breaks down the chip shortage and global dependency on Asia

Intel Chip
Intel Chip (Image credit: 60 Minutes)

What you need to know

  • Intel CEO Pat Gelsinger recently went on the CBS show 60 Minutes.
  • During the show's interview, he stated the U.S. had seen a drastic dropoff in semiconductor production.
  • It's reiterated that Intel is the last domestic line of defense for U.S.-based semiconductor needs.

Though there were many takeaways from Intel CEO Pat Gelsinger's time on 60 Minutes, including the announcement that Intel will be spending big money on Rio Rancho fab facility upgrades in addition to its $20 billion plan to make new fabs in Arizona, the biggest might be the sobering words Gelsinger shared regarding the state of the United States' semiconductor dependency.

After viewers were informed that there used to be twenty-five chip manufacturers globally and now there are only three, with Intel being the only U.S.-based one, Gelsinger then gave a stat that goes a long way toward explaining why the country's in the shortage rut that it's in.

"25 years ago, the United States produced 37% of the world's semiconductor manufacturing in the U.S.," Gelsinger said. "Today, that number has declined to just 12%."

For comparison, 75% of semiconductor manufacturing currently happens in Asia.

Gelsinger went on to say that reliance on any single region, especially one such as the ever-unpredictable Asia, is a risky strategy. He added that Intel's goal is to bring some of that dependency back home so that domestic chip output is better equipped to handle the needs of the U.S. citizenry, in addition to benefits like creating U.S. jobs. By bringing production home, the U.S. will be in control of its technological future.

When TSMC's outpacing of Intel in the manufacturing sector was brought up, Gelsinger had an optimistic take: "We believe it's gonna take us a couple of years and we will be caught up."

Time will tell if Intel can live up to that goal, catch up to TSMC, and help protect the U.S. from future chip shortages as dire as the current one.

Robert Carnevale

Robert Carnevale is the News Editor for Windows Central. He's a big fan of Kinect (it lives on in his heart), Sonic the Hedgehog, and the legendary intersection of those two titans, Sonic Free Riders. He is the author of Cold War 2395. Have a useful tip? Send it to robert.carnevale@futurenet.com.

  • Economic nationalism is the last refuge of a company losing the race. This is Intel begging for subsidies. The joke is that America's $100B+-in-annual-revenue tech companies aren't worried enough to build factories themselves (in the US or anywhere else), and that "Asia" in the Intel exec's quotes means democratic allies Taiwan and Japan. (Intel itself doesn't mind using Nikon for some of their fabrication.) Some crisis. And who is America's supposed champion losing to? Damn furr'nurs Apple and AMD (both based on California). Poor Intel!
  • It is not that simple. To summarily conclude that economic nationalism has no impact is a major oversimplification. In the first place, why is any manufacturing offshored? Why not make things right at home in your backyard? I can tell you from first hand experience when I was in my PhD here in the US that it is so much cheaper and more efficient to make things in Taiwan. To the extent that we fabricate all our PCBs, our chips, the wire bonding, packaging etc. all in Taiwan. There are US companies that offer these services locally at 5X or greater the cost. My Professor simply could not afford it on his grant funds. The local companies are slowly dying. Only the design and measurements are done here, all manufacturing and assembly is in Taiwan. Over time, the skills to manufacture things gradually fade from lack of use and practice. That's why in the US you have very strong designers but slowly weakening fabrication and manufacturing. That is what is affecting Intel. The greater proportion of the PhDs are so strong in design and simulation, but we only have a theoretical knowledge of making the chips. Graduate school departments that specialize in fabrication are nowhere as large as those that specialize in design. Just go to any University in the US to verify this. The designers get massive funding compared to the fabrication departments, because most of the big companies like Qualcomm, Nvidia etc. don't make their chips here anyway, but they do hire their designers from the US. I can go on and on. For sure, government supporting and encouraging local fabrication goes a very long way. If you are not in the industry, you may not know this. But what Gelsinger is saying is very true. The outcome is directly proportional to the investment in training and R&D. A government funded venture with no strings attached will outlast and out-compete a shareholder funded endeavour that's constantly at the mercy of investors and Wall street.
  • Samsung has a large Chip foundry in Austin. Why isn't Google, Apple, MS, HP, Dell etc manufacturing anything ? For the same reason Nike doesn't. The only way to do it is to force them via Government , yo know, they ol' Government interfering in the supply chain eg via legislation or incentive aka socialism :) No one wants to manufacturer, it's why they moved it all off shore to where environmental laws can be ignored and labour isn't as big an issue. The money is in rent seeking using IP and doing not much at all. Apple makes truck loads of money skimming off people doing the actual work (developers) in an an App store and ensuring the US Government protects that monopoly, there is not real money in making an M1 chip, unless you are the last man standing. There are very few companies that can step in with many billions and set up a semi conductor plant and keep it leading edge.
  • Very well said, I couldn't have put it better. TSMC did not rise to prominence on shareholders' funds alone - at least not at the beginning (and probably not even now). That would simply not have been possible. The pressure placed on companies to deliver short term returns by shareholders is simply against the long term vision, patience, risk and R&D required to compete at the very leading edge. GlobalFoundries pulled out of the cutting-edge race. They would probably have stayed in the bleeding edge game if they were government sponsored or somehow supported by legislation. The effect of government intervention on this massive investments is very real.
  • Taiwan is a tiny country. TSMC did not grow because they were government sponsored. They grew because they have extensive technical supply chains and pour lots of money into R&D and facilities.
  • If you think the government of Taiwan had no hand at all in the forming or support of TSMC, you only need to do a small reading of their history. Read up on the history of Morris Chang, Industrial Technology Research Institute of Taiwan, and the founding of TSMC. I've been following these things for very many years. It's the same with the initial industrial era Japan and South Korea. Read Robert Noyce's story in the book 'The Man behind the Microchip' to have very good perspective on the way the south-east Asian countries and their governments handle technological investments.
  • Thanks for sharing in depth info like this
  • I'm not so concerned about manufacturing taking place in Taiwan or Japan (allies), where it is more cost effective, except to the extent that China wants to take over Taiwan. My main concern is about manufacturing in China, because they steal the IP and use that to create competing Chinese products. The Chinese government, which ultimately runs all Chinese businesses (either directly or through threats and extortion) is hell-bent for leather in their quest to replace the US, Europe, and Japan in setting global standards. I don't like the idea of subsidies in general -- they just distort the economy and help inefficient producers stay in business. That's just corporate welfare, which is even worse than citizen welfare. However, to the extent that other countries are not playing fair (especially China), we should not practice unilateral disarmament as they subsidize their companies to put ours out of business, then raise prices and reap the rewards for having removed the competition. In that case though, I prefer punitive tariffs to raise costs for doing business with the bad actors. To avoid those tariffs becoming just another commerce-crippling and destructive tax that the government gets addicted to and to ensure those countries know how to end the tariffs, they should be clearly set to automatically sunset when those countries stop the bad behavior.
  • These points you are making are not new. I would encourage you to read up on Robert Noyce's story in the book 'The Man behind the Microchip'. Noyce, being the cofounder of Intel was very much aware of these dynamics. You would get a lot of info and perspective on how the American business system and Washington DC works compared to the south-east Asian mega-businesses and their governments. It's very enlightening.
  • Kaymd, yes, I've not read it, but I believe I'm familiar with the model then. That goes back to "Japan Inc." where governments of those countries (pre-China's rise as the global manufacturer) sought to put substantial protections in place for their companies against foreign (to them) competitors, while working to sell into the relatively open US and the rest of the world. We never responded to that in a smart way to the extent that the goal was to protect American manufacturing. Whether we should have is debatable with good arguments on both sides. The main counter arguments to trying to address that are economic: let the manufacturing take place in the most cost-effective place, because that improves the economies of both sides of the transaction, increasing global wealth. Win-win (at the cost of losing American manufacturing). Then, unlike now, the only consequence to that was that manufacturing shifted to other generally capitalist and friendly nations (Japan and Taiwan were competitors, but allies, not threats). The situation is radically different with China. Their economic progress is not the goal, as it was for Taiwan, Thailand, South Korea, Japan, and other southeast Asian nations. It is a chess move in a larger strategy that includes military control of Taiwan, harming the US as punishment, and seeing China and its Yuan become the de facto global standard, which would devastate the US economy, dependent on global support for the dollar.
  • Yeah I agree the situation with China seems a bit more complicated. One thing that really strikes me is how they buy up so much real estate in other countries/cities (eg London) as well as mines etc in Africa. I think its good what the Intel guy said and hopefully more will follow.
  • This is all well and good, but the bottom line is value. Value is expressed from the point of view of the customer. Value is a balance price against quality. Most people what reliable tech, but don't want to pay a premium (except the ridiculous iSheep). Competition in the chip market is what drove most of those other chip makers out. Intel would LIKE to convince us that by shouting 'Merica! that we'd rally to buy tech using their chips. But if their product drives prices up for very little advantage in performance and reliability, then they won't be very convincing. And, as long as progressive keep insisting on driving up minimum wage, that will continue an upward pressure on all other pay.
  • Those darn progressive, those darn iSheep, darn minimum wage... Please, none of this is helpful. First off, let me advise you when you purchase an Apple product. You're buying into an ecosystem, not just a product. The general common knowledge of what you're buying is quality, simplicity. Right now, new Apple M1 laptops or Mac mini offer generally better quality, better performance (watch all the millions of benchmarking tests on Youtube) at a lower or equal price than competing (same class) Windows Intel or AMD machines. We could also make a case for iPhones vs. flagship Android phones... But, whatever if you use an Apple product and Windows product, Android, etc., it's all good; they are just machines. And, calling someone a sheep (so overused) makes you sound like a sheep. Back to the topic, I agree with Intel's CEO we need more fab in America, we need more Americans with Fab skills, these will easily pay over the minimum wage, so it's a moot point to blame the Progressives. Somehow many Americans consider the golden age when we had lots of Unionized Manufacturing. Well, those Union workers had rather high salaries, livable wages that pushed families into the middle-class. We have too many under-employed citizens, let's train them, we need to be vertically integrated not just in supply but in production as well! Best Wishes.
  • Good price for spec is nice but it should not be at the cost of everything else that we find important. There needs to be balance in this. Also regarding the minimum wage, its actually better since a strong middle class is better for a country's welfare (because they spend relatively more that a hand full of rich guys) and not even to mention the well-being.
  • What's up with all the Intel puff pieces lately? First, I'm glad Gelsinger is in place as he's the right guy to get Intel back on track. He has a lot to fix. However, it's clear that the interview is for government help for Intel which is sickening considering Intel's history and predatory behavior. Intel is part of the reasoning the semiconductor industry is the way it is in the United States. Their predatory practices put companies out of business, built Intel into a goliath, etc. Intel has no one to blame but themselves for their current predicament. Manufacturing will never return to the United States because too much of the supply chain no longer exists in the United States. To build something, you need A to Z all lined up for efficient manufacturing. And Intel is choosing to build new factories in Arizona due to a favorable business environment (aka, minimal taxes). Arizona is one of the worst practical places to build semiconductor factories. Semiconductor factories consume enormous quantities of water. Good thing they picked a desert!
  • Again, everyone oversimplifies things. I guess this is the so-called armchair CEO syndrome. Do you work in the semiconductor industry? In chip fabrication or IC design? For how long? How intimate are you with the real dynamics of the business? It's very easy to point out Intel and declare they are completely to blame when they operate in the most ruthlessly capitalistic system in the world. I am surprised the government of the US even bothered to bail out the big auto in 2008; it would have been more characteristic of them to leave them to die since "well, it's business, and begging government in the US for help is not allowed!". Any misstep or difficulty a company faces here leads to merciless destruction. In turn, the companies react ruthlessly and only focus on profit to the exclusion of all else, since that is the gold standard and the only reason for existence and survival (forget social responsibility or developing the home base; that's for the weak minded lazy masses). Hence, the offshoring of all manufacturing etc. Then we complain the 'supply chain' no longer exists, as if it miraculously walked away and we didn't get rid of it ourselves because 'maximum profit'.
  • I hope the actual interview was better than this summary, but this (and another summary I read elsewhere) is pure loser's jingoism. If US and the world grow in this unfortunate America first attitude everybody will lose in the end. How is it a bad thing if there are 3 manufacturers in the whole world and the US with 5% of the world's population has 33% of that? How is it a bad thing if the US used to have 37% of the production decades ago, and now has 12%, in an industry in which volume has grown by stunning orders of magnitude. 37% of say 100, is 37, but 12% of 1000 is 120 for example. Simple math, anybody? If the US should hold 65% of the manufacturing on pure competitive and comparative advantage basis, that is totally fine. The US today dominates many software sectors despite the population statistics above. If the new idea is that everybody must produce to be self reliant, then all the benefits accruing to the US from those industries where it comparatively dominates (and there are more of those than the other way round) will also vanish. Just sayin. And, it is disingenious to attribute lack of local manufacturing to chip shortages. The shortages are worldwide based on disruptions to the value chain from Covid events. The same way you had problems with toilet paper a year ago. But hey, anything to get Intel into the pockets of taxpayers in one way or another while laying the foundation for wealth destruction down the line.
  • Up until a few years ago, the US had one of the highest corporate tax rates in the world. Lower this tax rate and guess what. Companies have a good reason to manufacture things in the US. The corporate tax rate is one of the major cost drivers for production. Labor and regulations (environmental, zoning, building codes, etc.) are additional factors. Given that fabs are complicated and expensive buildings, I don't think regulations are that meaningful. Labor would be an issue--2000 employees at an hourly wage/salary gets expensive. If the average salary is $50K in the US versus $15K in Asia, you are talking a difference of $70 million per year. I am only guessing at the differential and I did not include the cost of benefits. However, if you are spending $20 billion on new fabs, labor cost is not a major issue. Intel's gross profit in 2020 was $43 billion. If they paid the 35% federal tax rate from the obama years, the tax bill is $15 billion. We can talk about subsidies, but no one ever talks about taxes. If a company is forced to pay $15 billion in taxes but can move production overseas and pay $1.2 billion, maybe there is something wrong with the tax policy in the US.
  • This is total bs that rich Republicans push. The truth of the matter is every republican administration has dropped the corporate tax rate significantly and that has never resulted in more manufacturing. It has only resulted in the widening gap between the rich and everyone else, with the destruction of the middle class.
  • What are you talking about? Look it up and inform yourself. The US corporate tax rate was 35% from 1992 until 2017 when it was lowered to 21%. Prior to that, the US corporate tax rate was 31% from 1987 to 1992. Prior to that, it was over 40% until 1950. It was never lower than 20% until before 1939. During the New deal (1932 to 1940), the corporate tax rate rose from 14% to 19%. Further, income taxes were unconstitutional before 1913 until the passage of the 16th amendment. Some senators complained and wanted a maximum rate of 10% included in the amendment. However, the argument against the 10% cap was that the citizens would vote us out of office if it got close to 10%. Care to know what the highest tax rate was? over 90%. It is currently 39% You may be confused about the personal tax rate. And you are also talking about the Laffer Curve, which basically states that as you lower tax rates, you produce more tax revenue. This is similar to the price elasticity curve, which states that if you lower the price of a good or service, you generate higher demand.
  • dirtyvu There is another quirk in the tax code. If a company earns a profit overseas (think of Apple selling an iPhone in England), they will pay taxes on the profits in England. If Apple brings the money to the US (transfers the profit from a bank account in England to a bank account in the US), Apple would pay the federal corporate tax on the profits again. So, most US companies with overseas earnings, never bring profits home. They inturn use the profits to build factories and operations around the world, but not in the US.
  • The real question is when does the shortage of chips become a national security issue. We have become so dependent on electronics, that almost nothing can get done without 'chips'. If the problems start to interfere with day to day activities (electricity, water, gas, food etc), then this country is in big trouble. At the same time, how does one regulate foreign chip making facilities, and prevent them from terrorist attacks? I know it is not a simple solution to bring back chip making to the US, and I don't think Intel is necessary looking for handouts, but I think the federal government needs to be proactive, and not reactionary. If the federal government needs to subsidize chip making in order to be competitive with world markets, then so be it.
  • When?
    It already is.