Tech

Intel CEO says semiconductors are like oil — making more in U.S. can avoid global crises

Key Points
  • Intel CEO Pat Gelsinger compared to semiconductors to oil in a CNBC interview Wednesday before testifying to the U.S. Senate.
  • "Oil reserves have defined geopolitics for the last five decades. Where the fabs [factories] are for a digital future is more important," Gelsinger said.
  • Intel has been investing billions of dollars to build chip plants in the U.S. and Europe.
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Intel CEO Pat Gelsinger: U.S. must act now on semiconductor manufacturing

Intel CEO Pat Gelsinger on Wednesday likened semiconductors to oil, suggesting that computer chips will play a central role in international relations in the decades ahead.

"Oil reserves have defined geopolitics for the last five decades. Where the fabs [factories] are for a digital future is more important," Gelsinger said in an interview on CNBC's "Squawk Box." "Let's build them where we want them, and define the world that we want to be part of in the U.S. and Europe."

Fabs is shorthand for fabrication plants, which are the factories where semiconductors are manufactured. The vast majority of chips are currently made in Asia, especially in Taiwan. That concentration has raised natural security concerns, particularly as China has scaled up its military presence near the democratically ruled island that Beijing claims as its own.

Semiconductors also have been in short supply during the Covid pandemic, as production disruptions clashed with surging demand for the chips that are used in electronics, ranging from smartphones to cars to washing machines.

Under Gelsinger's leadership, Intel has made an aggressive push to geographically diversify chip manufacturing. In recent months, Intel has announced massive investments to build new fabs in the U.S. and Europe. Intel also started work last year on two chip factories in Arizona.

U.S. President Joe Biden puts his arm on Intel CEO Patrick Gelsinger during an event on the ongoing supply chain problems in the South Court Auditorium of the Eisenhower Executive Office Building on January 21, 2022 in Washington, DC. Gelsinger announced that Intel Corp would invest an initial $20 billion to develop a new semiconductor manufacturing plant in Ohio.
Chip Somodevilla | Getty Images

The Santa Clara, California-based company — an influential firm in the early days of Silicon Valley — also has been pushing officials in both Washington and Brussels to support legislation that would include government money to assist in semiconductor production.

Gelsinger's comments Wednesday came ahead of his testimony before the U.S. Senate in support of a $52 billion subsidy plan.

The former chief of cloud computing company VMWare, Geslinger, is not the first person to compare semiconductors to oil. But his remarks take on increased salience because crude oil prices jumped this year due, in part, to the Russia-Ukraine war and fears of supply disruptions.

It's the latest instance of geopolitical tensions leading to elevated fuel prices and, in turn, concerns about their impact on American consumers. It's happened before, such as in the energy crisis of the 1970s.

Geslinger expressed concern for the humanitarian consequences of Russia's attack on Ukraine, while also pointing to economic implications.

"While the Russia-Ukraine situation isn't central to any of the supply chains for semiconductors, it just reinforces the geopolitical instability and the urgency around building supply chains that are geographically balanced — U.S., Europe and Asia — and far more resilient for the digital future," he said.

"Everything digital runs on semiconductors, and it is just essential that we build these fabs where we want them."

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Watch CNBC's full interview with Intel CEO Pat Gelsinger