Intel’s $20 Billion Ohio Plant Mistake

Intel was once an innovator in the chip industry then it lost its way and now it’s trying to make a come back but in our opinion, it’s already made a huge mistake. Intel recently announced it would build a $20 billion dollar chip plant in Ohio.

An initial $20 billion investment – the largest in Ohio’s history – on a 1,000-acre site in New Albany will create 3,000 jobs, Gelsinger said. That could grow to $100 billion with eight total fabrication plants and would be the largest investment on record in Ohio, he told Reuters.

Reuters

Why do we think it’s a mistake? The FIRST thing we did when we read that announcement was to head over to Census.gov and take a look at Ohio demographics and they didn’t look good to us. Let’s break it down.

The population as of 2021 is estimated at 11,780,000 but the working age population is only 63% are of the population. Persons age 65+ are almost 20% of the population. From 2010 to 2020 the population grew from 11,536,504 to 11,800,000 respectively. In 10 years, the state gained a whopping 261,000 residents! The state also has very little diversity with a whopping 80% of residents white, 13% black and the rest are different races or ethnicity. To compare and contrast take a look at the table comparing Ohio to Texas.

From the table you can easily see Texas has a much larger population, a younger population, more workers, more diverse population, more veterans, and more foreigners. These are key metrics you need for a company that wants to sell next gen chips to a global marketplace.

But one other KEY factor that needs to be considered is how many universities and pipeline of young people coming into your ecosystem. Ohio has 14 universities, 24 regional branch campuses and 23 community colleges. Not bad but consider that Texas has 100 universities churning out 1 million students each year and it’s clear that Intel would have been better off in Texas along side Apple, Texas Instruments and others.

We suspect that Intel bean counters got a great deal on tax credits and the bean counters jumped at the chance to save a few bucks instead of looking at the big picture and that’s Intel’s key problem; they can’t seem to ever see the big picture any more and focus on the wrong thing (tax breaks) instead of what they truly need: innovation, creativity, and PEOPLE! The median age in Ohio is 39 but 34 in Texas.

Lastly, it is important to point out that as people get older then tend to migrate from colder climates to warmer climates and with 10,000 boomers retiring each day, it won’t surprise us if Ohio’s population dwindles over the next 10 years despite this new plant.

We wish Intel the best of luck but we’ll skip buying the stock for now and we’ll see if this turns into a mega-disaster or mega-opportunity. And no, we don’t work for the state of Texas, we’ve just noted that companies like Tesla, Oracle, and Hewlett Packard have opted to leave California for Texas and those companies clearly understand the demographic situation very well.

Stay tuned and stay solvent…