Intel counters call for outsourcing

As the cost of building chip manufacturing plants continues to grow, vendors will increasingly be forced to outsource, Intel predicted. But meanwhile the chip maker itself expects to escape that trend.

The cost of building and running a fab is about $10bn, said Intel's chief financial officer and executive vice president Andy Bryant, requiring that a manufacturer makes about $10bn in annual revenues.

"If you don't have that kind of revenue base, it's going to be tough for you to get a return on [your investment]," Bryant said at an event for press and analysts at its Hillsboro plant in Oregon.

Intel last year sold more than $30bn in chips. Samsung is the only other chip vendor that surpassed the $10bn mark, according to data from analyst firm Gartner that Intel presented at the event.

"There's a whole bunch of companies on this list that are between $5 and 10bn.
If you're there, you're probably outsourcing manufacturing. It's going to be hard to have sustainable profitability and it's only getting more expensive."

The increasing cost of microprocessor factories is a result of advancements in chip development, with faster smaller chips becoming more expensive to produce. However, those advances shouldn't be seen as an argument against developing new semiconductors, Bryant cautioned.

Advances in chip efficiency more than offset the added cost of developing and manufacturing them, he argued. Were it not for smaller, more efficient chips, manufacturers would need to build even more factories than they are already doing.