Intel CEO Pat Gelsinger shepherded in a new era for the chipmaker today, announcing the company would open its fabrication facilities to contract customers and invest $20 billion to construct two new chip fabs in Arizona this year.

The new division, called Intel Foundry Services, is part of the company’s Integrated Design Manufacturing 2.0 — or IDM 2.0 — initiative, which seeks to expand and diversify the company’s manufacturing capabilities, including internal, external, and contract manufacturing.

“Today, I'm announcing our plans to be a world-class foundry business and a major provider of U.S. and European-based capacity to serve customers globally,” the newly minted Intel chief said, during a press conference Tuesday afternoon. “The digitization of every industry is accelerating the global demand for semiconductors at a torrid pace, but, a key challenge is access to manufacturing capacity. Intel is in a unique position to rise to the occasion and meet this growing demand while ensuring a sustainable and secure supply of semiconductors for the world.”

By opening Intel's semiconductor fabs to contract customers, Gelsinger hopes to realize a $100 billion market opportunity by 2025. He added that Intel’s expansion into this space will also serve to rebalance the distribution of semiconductor capacity, which is heavily centered in Asia.

“The industry needs more geographically balanced manufacturing capacity,” he said. “We are committed to ensuring this capacity will support commercial customers as well as address unique government and security requirements in the U.S. and E.U. to deliver this vision.”

In addition to manufacturing capacity, Gelsinger said Intel would also open its intellectual property, including X86 cores, graphics, media, display, artificial intelligence (AI), and interconnect technologies for license and work with outside IP holders like Arm.

“Intel foundry services will provide access to silicon design services to help our customers turn silicon into solutions,” Gelsinger said.

One of the company’s first customers will be Microsoft.

“As chips become more specialized and cloud architectures become more optimized for new workloads, we will need to collaborate to co-design the next generation of systems from the hardware to the system to the software. That's why we are so energized by your and Intel's vision for IDM 2.0,” Microsoft CEO Satya Nadella told Gelsinger.

However, while Nadella expressed enthusiasm for Intel’s new direction, he offered few details as to how Microsoft might leverage Intel Foundry Services in the future.

To support Intel’s new contract manufacturing business, Intel plans to massively ramp its capital expenditures moving forward, beginning with the two new facilities in Arizona.

“We plan to build two new fabs in Arizona located in Intel's Ocotillo campus with planning and construction activity starting this year,” Gelsinger said. “This represents an investment of approximately $20 billion, which will create over 3,000 permanent high-tech, high-wage jobs in Arizona and over 3,000 construction jobs.”

To offset the cost of the new fabs, Intel is working with the state of Arizona and the Biden administration to secure subsidies. However, Gelsinger said Intel would move forward even if these funds don’t materialize.

The Arizona fabs are only the beginning of Intel’s expansion. The chipmaker plans to announce additional fabs in the U.S., Europe, and elsewhere within the year.

To ease customers' transition away from competing fabs, Intel is also championing new standardized process design kit models. “We know our process technology must allow for easy design access and porting from other foundry platforms,” Gelsinger said.

Turning to Intel's core CPU business, Gelsinger reaffirmed confidence in the company's 7-nanometer silicon, which he said was on track for early 2023.

“When Intel initially designed 7 nanometers, [extreme ultraviolet (EUV) lithography] was still a nascent technology, so, we developed our process to limit the use of EUV,” he said. The side effect of this was increased process complexity, which had a domino effect, delaying the company’s current generation 10-nanometer chips, he added.

“I’m pleased to share that we have now fully embraced EUV, [and] we've re-architected and simplified our 7-nanometre process flow,” Gelsinger said. “As I mentioned on the January earnings call, we will continue to build the majority of our products in Intel fabs.”

But as part of IDM 2.0, Intel will also expand its use of third-party fabs like Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung Electronics, and Global Foundries to supplement the chipmaker’s own capacity.

“Today we use foundries to manufacture many products including chips for communications conductivity, graphics, and chipsets,” Gelsinger said. “As we grow the business we expect our engagement with foundries to grow in both size and scope. This includes manufacturing a range of modular tiles on advanced process technologies, including products at the core of our compute offerings for both clients and data center segments.”