Intel (INTC 5.21%) stock is making big gains in Tuesday’s trading. The semiconductor giant’s share price was up 4.7% as of 1:45 p.m. ET, according to data from S&P Global Market Intelligence.
Intel stock is climbing following news that the company will be building a $25 billion new manufacturing facility in Israel. The country’s government will be providing $3.2 billion to help fund the production of the facility.
Intel makes another big bet on chip production
Intel’s new production plant will be built as an expansion of its current facility in Kiryat Gat, Israel. According to a statement released by Israel’s government and the chip giant, the $25 billion that will be spent to build the new semiconductor fabrication plant represents the largest ever outside investment in the country. Intel already has roughly 12,000 workers in Israel, but the planned facility represents a major expansion initiative and should significantly bolster its production capabilities.
Why is Intel’s fabrication push so important?
The majority of contract chip manufacturing operations are currently handled by Taiwan Semiconductor Manufacturing (TSM 1.26%), with the company currently controlling roughly 60% of the market. When it comes to the types of advanced chips that are used for high-end artificial intelligence (AI) applications, TSMC’s dominance is even more pronounced. The Taiwan-based fabrication leader commands roughly 90% of the contract fabrication market for high-performance chips.
But having the production of the world’s chip supply so heavily concentrated in Taiwan presents potentially disastrous bottlenecks — particularly as China has indicated that it plans to bring the country back under its territorial control. Nations including the U.S. and Israel have been introducing funding initiatives to bolster domestic chip production capabilities, and Intel is receiving funding from both countries to push ahead with new design and fabrication facilities.
With an influx of government support, Intel may be able to accelerate key initiatives and catch up to rivals that have surpassed it in important areas of semiconductor design and manufacturing. Government funding doesn’t necessarily guarantee that the company will be able to beat top competitors when it comes to high-performance chip production and design. But surging governmental support is undoubtedly a favorable development for the semiconductor giant, and it could play a big role in the company’s turnaround initiatives.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
