By Benjamin Pimentel
SAN FRANCISCO (Dow Jones) -- Semiconductor maker Intel Corp.
said Tuesday that it plans to spend $7 billion over the next two
years to build advanced manufacturing facilities in the U.S., a
major capital investment at a time of uncertainty in the chip
industry.
Intel shares rose briefly Tuesday on the announcement, but were
down 3.5% at last check.
The announcement comes just a few weeks after Intel announced
that it was closing five facilities worldwide, and mounting
concerns of declining demand in the industry. The move could also
be good news for makers of chip manufacturing tools, which have
been reeling from a dramatic drop in demand in the semiconductor
industry.
On the other hand, Intel's plan, which signals the chip giant's
advance to a 32 nanometer manufacturing process, also puts more
pressure on archrival Advanced Micro Devices Inc. , which has
struggled to keep up with its bigger competitor's advances in
production technology.
AMD shares were down 9.3% after the company also announced that
it has yet to get the needed votes for a planned spinoff.
"This will open the process tech gap even wider in Intel's
favor," said analyst Brian Piccioni of BMO Capital Markets, noting
that AMD just got into the 45 nanometer manufacturing process,
while Intel is already pushing into the 32 nanometer
technology.
Analyst Steve Allen of Sierra Tech Research said Intel's move
was not surprising and fits a pattern in its rivalry with AMD.
"In good times or bad they ramp to the next process node," Allen
said. "AMD tends to scale back and then try to surge when times are
good. They pay up for equipment and rush to expand capacity.
Intel's method does not always please the CFO [chief financial
officer] for the in-quarters, but the longer term view has
certainly paid dividends in the long run."
Intel said the money would fund factories that use its
32-nanometer manufacturing technology to build faster, smaller
chips that consume less energy. The chip giant will invest in
existing manufacturing sites in Oregon, Arizona and New Mexico and
will support about 7,000 high-wage, high-skill jobs at those
locations -- part of the company's total U.S. workforce of more
than 45,000.
Late last month, the company had unveiled a plan to close
facilities in Malaysia, the Philippines, Oregon and California in a
move that would affect between 5,000 and 6,000 employees. Not all
the employees would be asked to leave, the company had said.
"Most of the plant closures were for older assembly and test
facilities in Asia. In the U.S. employees will have the opportunity
to find jobs at the sites where we will be building new
facilities," said Intel spokesman Tom Beerman.
In a prepared statement, Intel Chief Executive Paul Otellini
said, "The capabilities of our 32 nanometer factories are truly
extraordinary, and the chips they produce will become the basic
building blocks of the digital world, generating economic returns
far beyond our industry."
In a speech before the Economic Club of Washington, D.C.,
Otellini also underscored the need for tech companies to invest in
the United States. He quoted former Intel CEO Andy Grove who said,
"bad companies are destroyed by crisis. Good companies survive
them. Great companies are improved by them."
Otellini called the current crisis the worst he has seen since
he began at Intel about 35 years ago, adding, "For nations like the
U.S., absolutely nothing about the future is inevitable or
guaranteed -- not jobs, not leadership, not our standard of
living."
Piccioni said the Intel announcement also boosts its public
image as a major U.S. corporation, especially at a time of massive
job cuts.
Analyst Roger Kay of Endpoint Technologies Associates echoed
this view saying, "This announcement is aimed at Washington. Intel
is saying, 'Yes, it has mothballed some plants to reduce fixed
costs, but a chunk of its new investment will be made in the United
States.' It's show of good citizenship."