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."