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Intel doubles down on chip manufacturing with $20 billion investment

Intel's new CEO Pat Gelsinger is doubling down on chip manufacturing.

The company — which has been pressured to outsource more of its chipmaking — announced Tuesday during a business update its plan to invest $20 billion to build two new factories in Arizona.

"There is an extraordinary demand for semiconductors as we're seeing basically, the world is becoming more digital in every aspect," Gelsinger told Yahoo Finance Live of the investments. "Also the world wants a more balanced supply chain, there's an extraordinary concentration of nations."

Gelsinger says that he views Intel's internal chipmaking as a key strategic advantage. The comments on production echo those made by Gelsinger to investors soon after he started at Intel as CEO in late February.

To bring home the point, Gelsinger was joined on the digital stage during a virtual conference call by Microsoft CEO Satya Nadella and IBM CEO Arvind Krishna. Both expressed confidence in Gelsinger's plan to keep chipmaking in house.

Intel shares (INTC) rose about 3.6% in early trading on Wednesday.

Gelsinger arrived at Intel at a pivotal time.

Disruptions during the COVID-19 pandemic compounded with Intel's own delays in producing its next generation of smaller, more powerful 7-nanometer chips. In mid-2020, Intel said initial production shipments of these chips would begin in late 2022 or early 2023, a year behind the company’s previous schedule. Competitor AMD has already begun selling its 7-nanometer processors.

The delays prompted the arrival of activist investor Dan Loeb of Third Point to Intel in late December. Loeb — armed with a reported $1 billion investment in Intel — implored the company to consider outsourcing most of its chip production.

Loeb's arrival ultimately helped spur the exit of Bob Swan as CEO, a decision announced on Jan. 13. Gelsinger was appointed, and officially took over the top job on Feb. 15.

He brings extensive institutional knowledge to Intel and a keen eye on tech processes. Gelsinger started at Intel at the age of 18, and was its first chief technology officer. He left in 2009 after 30 years at Intel to assume the CEO position at VMWare.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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