President Joe Biden on Friday praised Intel's plans to spend $20 billion on a new US semiconductor facility, hailing the "historic" investment even as a global chip shortage fans the inflation wave weighing on his leadership.

Biden is urging manufacturers to bring production back to the United States, which was once a leader in making the chips key to everything from vacuums and televisions to cars which have become scarce during the pandemic.

Intel said it plans to begin construction at the end of the year on two plants in the Midwestern state of Ohio, and chip production could start as early as 2025.

"This is a truly historic investment in America and American workers," Biden said at the White House, where he spoke alongside Intel's CEO Pat Gelsinger.

Biden called it "one of the largest investments in semiconductor manufacturing in American history."

Problems in global supply chains have highlighted the fundamental importance of semiconductors, as well as the risks of overreliance on imports.

The closure of semiconductor plants, particularly in Asia, due to pandemic disruptions led to a global chip shortage that has affected a range of industries from automobiles to video games.

That was coupled with surging demand creating bottlenecks, forcing companies to slow production, and sending prices soaring.

"This will be our first new manufacturing site in 40 years, and spanning nearly 1,000 acres (400 hectares) will be a mega fab location," Gelsinger said at the White House.

"The site alone could grow to as much as $100 billion of total investment over the decade," he added.

Intel has announced a major investment in US chip production, as a shortage contributes to surging inflation weighing on Joe Biden's presidency
Intel has announced a major investment in US chip production, as a shortage contributes to surging inflation weighing on Joe Biden's presidency AFP / MANDEL NGAN

With the pandemic highlighting industrial dependence on imports, governments, particularly in the United States and Europe, have focused on securing semiconductor supply after years in which manufacturing has shifted to lower-cost Asian countries.

Geopolitical tensions also play a roles as the chips are largely manufactured in Taiwan, over which China has expressed territorial claims.

In a statement cheering the Intel announcement, the White House lamented that the United States had "lost its edge -- our share of global semiconductor production has fallen from 37 percent to just 12 percent over the last 30 years."

Biden's administration wants to invest $52 billion in domestic semiconductor research and production.

The Senate approved a bill last year but it still needs to pass the House of Representatives.

Intel last year announced a $20 billion investment in two new factories in Arizona.

The company plans to hire 3,000 new workers for the new site in Ohio, and building the factories will involve 7,000 construction workers.

The announcement Friday comes ahead of an eagerly awaited decision from the California-based group on the location for its European factories, which will make semiconductor components so fine that they are measured in nanometers.

Germany appears to be the favorite to host the Intel site.

Other major players in the microchip sector also are considering locating production closer to American consumers.

South Korean electronics giant Samsung announced in November it would build a $17 billion factory in Texas.

Since the start of 2021, the semiconductor industry has announced nearly $80 billion in new investment in the United States through 2025, according to industry federation data cited by the White House.