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Illustration: Aïda Amer/Axios

Warning bells are sounding for the U.S. semiconductor industry as Intel grapples with internal and competitive challenges that could imperil the future of domestic chipmaking.

Why it matters: Chips are some of the only strategic tech products that are actually manufactured in the U.S., accounting for a quarter-million U.S. jobs. They're also a small but key piece in the power struggle between the U.S. and China.

Driving the news: Intel is weighing whether to outsource some manufacturing after struggling mightily to get its next-generation chip production up and running.

  • Costly delays are already handing a technical edge to rivals like AMD, which outsources its manufacturing to Taiwan's TSMC.
  • The percentage of chips made in the U.S. has already declined from 37% in 1990 to 12% today, according to the Semiconductor Industry Association, the trade group that represents U.S. chipmakers.

Policymakers and chip industry reps are now pleading for government intervention to keep what remains of U.S. chip manufacturing in the country.

The big picture: Beijing has grand designs on dominating the global chip market, which would in turn boost China's economic and technological might and could give the country an edge in A.I. and other next-generation technologies.

  • China's efforts have run into troubles of their own, but Intel falling behind will do the U.S. no favors.

Between the lines: For all the talk of how computers and smartphones should be made in the U.S., the practical reality is that we have neither the infrastructure nor the labor force nor the economic setup to bring such manufacturing here.

  • Chips, on the other hand, are highly strategic, require a modest but well-paid labor force and are already made here.

What they're saying: Both Treasury Secretary Janet Yellen and Defense Secretary Lloyd Austin talked about the strategic importance of the U.S. chip industry in their confirmation hearings.

  • SIA head John Neuffer said in a statement to Axios, "Semiconductors are critical to our economy, national security, and future innovation."
  • "To strengthen America’s semiconductor supply chains and keep our country on top in chip technology, leaders in Washington need to fully fund the semiconductor manufacturing incentives and research investments called for in the annual defense bill."

That bill — the most recent incarnation of the National Defense Authorization Act — has a provision that provides for federal incentives for domestic manufacturing and investments in semiconductor research.

  • However, those provisions still need to be funded through congressional appropriations.

Be smart: The right government investment and incentives could encourage other firms to expand U.S. chipmaking and prevent an exodus of chip jobs even if Intel does reduce the amount of manufacturing it does in-house.

What's next: Pat Gelsinger, recently tapped to be Intel's new CEO, acknowledged on an earnings call last week that "it's likely that we will expand our use of external foundries for certain technologies and products."

  • But he maintained that he remains "confident that the majority of our 2023 products will be manufactured internally."

Go deeper

Thousands without power as "hazardous" winter storm lashes East Coast

Winter view from Charlotte as winter storm Izzy creates dangerous conditions in Charlotte, N.C. on Jan. 16. Photo: Peter Zay/Anadolu Agency via Getty Images

A major winter storm was lashing much of the East Coast on Sunday, causing widespread power outages and disrupting travel over the holiday weekend.

The big picture: Heavy snow and ice accumulations are "likely to produce hazardous travel," downed trees and more power outages from the Mid-South to the Northeast, per the National Weather Service. Some parts of the U.S. can expect to see up to a foot of snow through Monday.

Updated 4 hours ago - Science

Volcanic eruption in Tonga caused "significant" damage

This satellite image of the eruption on Jan. 15 taken by Himawari-8, a Japanese weather satellite operated by Japan Meteorological Agency and released by National Institute of Information and Communications Technology (NICT). Photo: NICT via AP

Significant damage has been reported in Tonga following an undersea volcanic eruption on Saturday, which covered the Pacific nation in ash and cut off communication lines.

Driving the news: The eruption triggered tsunami warnings across Tonga's islands and in other regions, including the West Coast of the U.S. and New Zealand.

5 hours ago - World

North Korea launches 4th suspected missile test this month

A news broadcast in Seoul, South Korea, of an apparent North Korean missile test on Monday morning local time. Photo: Jung Yeon-je/AFP via Getty Images

North Korea's military fired "two suspected short-range ballistic missiles" eastward from Pyongyang on Monday morning local time, per South Korean and Japanese officials.

Why it matters: The fourth such launch since Jan. 5 comes days after North Korea's military warned of "stronger" action if the U.S. moved to have more sanctions imposed on the country.