White House reportedly discouraged Intel from boosting chip production in China

President Biden’s security and domestic production efforts may have a pronounced effect on Intel’s plans. Bloomberg sources claim the White House “strongly discouraged” Intel from ramping up chip production in China to help address chip shortages. The improved capacity could have been available before the end of 2022, but the Biden administration was reportedly worried about security issues.

The semiconductor firm didn’t completely rule out future Chinese production increases, according to the tipsters. However, Intel is believed to have “no plans” at present.

Intel didn’t directly acknowledge the government objection in a statement, but welcomed “other solutions” to help meet chip demand. The company had looked at a “number of approaches” in tandem with the US, including new wafer manufacturing in the US and Europe.

An approach like this wouldn’t be surprising, if accurate. Biden has continued a wary stance toward Chinese technology, going so far as to sign a law barring Huawei and ZTE from receiving FCC network licenses. While the sources didn’t elaborate on the security issues with Intel, company chief Pat Gelsinger previously said a heavy dependence on Asian manufacturing represented a supply chain threat. There have also been historical concerns companies were improperly sharing sensitive technology with China.

Even if security weren’t an issue, economic development might be a factor. Biden has pushed for more manufacturing in the US to address chip shortages, and Intel’s reported Chinese expansion would have contradicted that policy. It also wouldn’t have helped attempts to counter China’s growth as an economic superpower.

Whatever the reasoning, a change of heart like this also risks prolonging chip shortages. While Intel is building US plants and asking for external manufacturing help, those efforts will take time and might not cover every shortfall. Intel may have to accept a near-term blow to production to honor the White House’s goals, especially if it wants any factory-oriented funds from the stalled CHIPS Act.