Intel announces $7 billion investment in new chipmaking factories

Even as the chip industry suffers the pangs of recession, the top company in the industry, Intel, has announced plans to build new manufacturing plants at an investment of $7 billion over two years.

This is a bold move considering the fact that America is struggling in a recession that has resulted in major companies slashing their workforce and operating costs.

Less than three weeks back, Intel hd announced plans to shut five of its plants to save money. Moreover, several of its peers have also drastically cut down on operations and workforces. (See: Intel follows AMD in cutting down operations, to fire 5,000 employees  / American chipmaker Fairchild Semiconductor to cut 12 per cent of workforce  / Graphics chipmaker Nvidia announces major layoffs)

Analysts say the spending plan did not surprise markets, as it came on the heels of Intel's announcement it would begin ramping up its operations to produce chips based on 32-nanometer circuitry by 2009's final quarter, and was in line with the firm's annual capital expenditures.

Spokesman Chuck Mulloy said the firm would not raise capital but rely on internal cash to bankroll the plan, which the firm called its largest-ever investment for a new manufacturing process. "You never save your way out of recession. You invest your way,'' he explained. Mulloy said Intel hoped to manufacture the new chips in larger volumes than previously planned to get them into mainstream products - such as PCs - quicker. He did not elaborate on time frames.

Intel's investment will be divided among existing manufacturing sites in Oregon, Arizona and New Mexico and will support about 7,000 jobs at those locations. The company said its workforce in the United States is about 45,000.

Intel CEO Paul Otellini projected his company's $7-billion investment in new computer chip factories as a patriotic gesture for other businesses to follow. He used the opportunity of a speech before the Economic Club in Washington to vow that Intel would spend more money than ever to expand chip factories in the US. ''We believe in the company and in this country,'' he said.

He also urged companies trying to survive the recession to follow Intel's model of investing in future products. Such a message comes from a company that earned $11 billion in cash last year and uses its manufacturing prowess and financial strength as an edge over rivals.

Historically, Intel, based in Santa Clara, California, has invested in the plants, which cost more than $3 billion each, even during lulls in demand for computers. As a result, the company believes that the more advanced chip-making technology gives it more than a year's lead over rivals.

Intel, which said in January that its 2009 capital spending would be flat to slightly down from 2008's $5.2 billion, had more than $8.68 billion in cash, cash equivalents, and short-term investments at the end of 2008.