Intel CEO Pat Gelsinger recently told the BBC that the tech giant was no longer considering the UK as a possible location for a chip factory after Brexit. One of the largest semiconductor manufacturers in the world, Intel plans to establish and improve various factories across the EU with an investment totalling over $95 billion (£70 billion).
According to Gelsinger, they “have about 70 proposals for sites across Europe from maybe 10 different countries”. This push for new factories comes in the wake of a global chip shortage, showing what Intel believes to be an overreliance on Asia by countries in North America and Europe.
Intel has done very well for itself in recent times. While the chip shortage has been rough for the industries in need of chips, makers like Intel and AMD have seen their stock rise as a result. In 2020, Intel generated record-high numbers in net operating income and cash flow from operations at $23 billion (£16.9 billion) and $35 billion (£25.7 billion) respectively.
Since the BBC article came out, however, Intel has seen its stock dip slightly, going from $54.18 per share on 7 October to $53.44 per share as of this writing.
As has been heavily reported, the world’s ongoing battle with COVID-19 pandemic led to many factories across the world shutting down or massively lowering their output in 2020. When they started back up, however, they found that the chips they so often relied on were being sold to other markets.
The shortage has been especially felt in the automotive and industrial markets, where experts like Ambrose Conroy, CEO and Founder of Seraph Consulting, say the effects will likely be felt even in 2023.
However, nearly every industry that uses semiconductors is feeling the hit. Even cryptocurrency has felt the sting as crypto miners contend with the video game industry for access to the high-performance chips both groups need.
There are several causes for the hit. When these factories shut down or slowed their production, they also cancelled massive orders for chips which led to the chip manufacturers selling those chips elsewhere.
In early 2020, the rollout of 5G smartphones and higher demand for cloud computing services resulted in massive chip orders from major tech companies like Apple, Amazon and Huawei which further sapped the reserves.
What Does This Mean for the UK’s Tech Sector?
In the short term: not much. Some news sites have claimed that Intel was discontinuing or cancelling plans for a chip factory in the UK as a result of Brexit, but that’s clickbait.
The BBC article and Gelsinger’s words only state that they were no longer considering the UK as a potential location for this factory. “Considering” is the operative word here, as it does not say there was definitely going to be a chip factory built in the UK. Even if Brexit had never happened, the UK would have still needed to grapple with “70 proposals” from “10 different countries” looking for the same piece of the pie, if Intel received the same amount of proposals in a No-Brexit timeline.
Gelsinger states that Intel “absolutely would have been seeking sites for consideration” in the UK in this timeline, but consideration and actual concrete plans for a factory are two completely different things. You can consider ordering takeout tonight, but if you make plans to cook dinner instead, you didn’t “cancel your takeout plans”. It’s crying over spilt milk when milk was never even on the table to begin with.
While Intel is no longer considering the UK in this current initiative for new and upgraded factories, this doesn’t mean Intel will never build a new factory or do new business in the nation ever again. The UK is still the sixth-largest economy in the world with an IT industry that saw a 20% growth in employment by the end of 2020 according to Tech Nation. Any multinational tech company would be foolish to ignore a market of that size.
Anyone worried that the UK-EU trade deal might make chips from these EU factories more expensive should feel safe. No tariffs or quotas on either entity are allowed under the agreement unless one side moves too far from the currently-agreed-upon rules regarding product standards.
In the long term, the consequences of Intel’s dismissal of the UK from the chip factory conversation could have negative effects on the market. When a major company like Intel makes so public a move as this, other companies might begin to look at their future plans and decide to follow suit, taking their business elsewhere. It could snowball and result in the UK’s tech industry losing out on a lot of new opportunities they would have otherwise gotten had the UK remained in the EU.
Overall, this announcement isn’t good for the UK’s tech sector, but the sky isn’t exactly falling as a result. A chip factory from a major manufacturer like Intel could have potentially been great for the country, but worrying about things that didn’t happen only serves to heighten anxiety and distract from potential opportunities.
The tech industry in the nation is still healthy with the UK thriving in certain areas like deep tech investment even while North America and Asia fell according to Tech Nation’s 2021 report. If these trends hold, the future is looking bright for the UK going into 2022, chip factory or no.