Intel CEO Pat Gelsinger promised to restore a sense of leadership to the company that still puts the "silicon" in "Silicon Valley" Tuesday, unveiling plans to spend $20 billion to create new chip factories in Arizona that will be the linchpin of an expanded strategy to build chips created outside Intel.

In his first press conference since returning to Intel, where he spent the first 30 years of his career, Gelsinger unveiled what he called "IDM 2.0," referring to Intel's legacy as an "integrated device manufacturer" that designed, built and marketed some of the most important computer chips ever developed. Under this new strategy, Intel will elevate a fledgling third-party manufacturing business to new prominence as Intel Foundry Services, promising to compete with other third-party chip makers like TSMC and Samsung to build chips designed by companies like Apple and Qualcomm.

"We have always been in the business of defying physics and building the future, and that's not going to change," Gelsinger said.

The announcement also recognized that Intel, and by extension the United States, has fallen behind in chip-manufacturing technology, which would have been an unthinkable outcome when Gelsinger left the company in 2009. Demand for chips has skyrocketed during the pandemic, and shortages caused by supply-chain disruptions as well as national security concerns have prompted a call for increased investment in U.S. chip manufacturing, which Gelsinger pledged to provide.

"With most of the growth coming from leading-edge computing, which is our expertise, the majority of leading-edge foundry capacity is concentrated in Asia, while the industry needs more geographically balanced manufacturing capacity. Intel's advanced manufacturing scale, including operations in the U.S. and Europe, is critical for the U.S. and the world," Gelsinger said.

Intel said the first step in that regaining that leadership will come via two new chip plants at an existing facility in Chandler, Arizona. That new capacity will be dedicated for Intel Foundry Services customers, and Intel plans to announce additional facilities to support the new business unit later this year.

Intel CEO Pat Gelsinger has vowed to restore Intel's edge in chipmaking.Photo: Intel

The tech industry changed quite a bit in the 12 years that Gelsinger spent away from Intel, in leadership positions at EMC and later running VMware. Mobile processors became far more strategically significant than PC processors, and data center customers began to favor custom designs that a mass-market manufacturer like Intel found harder to duplicate.

AWS announced plans to offer customers a custom-designed server chip based on the ARM instruction set in 2018, and last year Apple unveiled its own custom laptop chip design built around its own ARM-based design. Both of those products generated serious interest, and arrived right at the same time that Intel ran into significant manufacturing problems that caused delays to its product roadmap.

TSMC and other chip foundries also charged ahead with new smaller manufacturing technology, and by the end of 2020 Intel faced calls to significantly change its strategy in light of the new landscape. Under the plan Gelsinger unveiled Tuesday, Intel will continue to make most of its own chips in-house, but the creation of Intel Foundry Services is a significant departure from the Intel of old.

Intel offered foundry services starting in 2013, but "our first efforts were, you know, somewhat weak, and we learned a lot through them but we didn't really throw ourselves behind them," Gelsinger said Tuesday. The new division will be led by Randhir Thakur and it will report directly to Gelsinger.

Operating a foundry while marketing its own chips exposes Intel to a classic technology industry problem: competing with your customers.

Just last week, a new Intel marketing campaign denigrating Apple's new M1 chip stirred up quite a buzz. But Gelsinger said Tuesday that he intended to compete for Apple's M1 business just like any other chip foundry; you might not see those commercials in the wild for too much longer.

"This is clearly a co-opetition story," Gelsinger said. "And one that by managing our business judiciously, by creating more business opportunities, leveraging our world class IP portfolios, we see IDM 2.0 as a unique strategy for Intel, and one that the world needs right now."

Intel's stock rose more than 4% in after-hours trading as Gelsinger delivered his remarks.