Intel Investing $7 Billion in U.S. Manufacturing Facilities

In January, Intel announced plans to slow production and shutter some chip manufacturing facilities. Now, the world's largest supplier of x86 processors for desktops, laptops and server systems is announcing that it will invest $7 billion in building facilities to manufacture its next generation of 32-nm processors - "Westmere" - which are scheduled to hit the IT market in late 2009. The news of Intel's investment comes as other companies, such as Panasonic, have looked to cut both jobs and costs.

Intel plans to invest $7 billion over the next two years to build and update its U.S. manufacturing facilities in order to ramp up production for the company's new line of 32-nanometer processors - a vital component for the still-growing "netbook" market as well as for future generations of desktops, laptops and servers.

Intel's investment is a breath of fresh air at a time that other companies, including Panasonic, have cut back on jobs and costs.

The Feb. 10 announcement from Intel comes just a few weeks after the company announced it would close or stop production at five manufacturing facilities, including plants in Oregon and California, and possibly cut between 5,000 and 6,000 employees.

However, most of these chip manufacturing facilities or fabs utilize aging 200-nm technology.

Intel's $7 billion will flow to existing manufacturing sites in Oregon, Arizona and New Mexico; the company claims that the investment "will support approximately 7,000 high-wage, high-skill jobs at these locations."

Intel currently has a work force of 45,000 employees in the United States.

"These manufacturing facilities will produce the most advanced computing technology in the world," Intel CEO Paul Otellini said in a statement. "The capabilities of our 32-nm 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."

The announcement also follows a dismal fourth quarter in which Intel's net income fell from $2.3 billion in 2007 to $234 million, a decline described by Otellini during a Jan. 15 conference call as "dramatic." The last three months of 2008 also saw Intel write off a $1 billion reduction in the value of its investment in WiMax provider Clearwire.

Intel's Atom processor for netbooks remained one positive note, with sales rising 50 percent between the third and fourth quarter of 2008 to the tune of $300 million in revenue. However, this was not enough to offset general declines in the processor market.

The U.S. recession, paired with global economic woes, has weighed down the IT industry in recent months, particularly the PC and server sales upon which the processor market depends.

The first 32-nm processors that Intel is developing, code-named "Westmere," could combine the latest Intel microarchitecture - Nehalem - with graphics capability integrated into the processor.

Boosted 32-nm production capability will allow Intel to produce Westmere chips later in 2009, with further 32-nm products rolling out in 2010.