Intel Corp to invest $7 billion to complete Arizona chip factory

Bloomberg

Intel Corp. Chief Executive Officer Brian Krzanich said the semiconductor maker will invest $7 billion to complete a chip factory in Chandler, Arizona, becoming the latest company to use a meeting with President Donald Trump to tout spending and job-creation plans that were already in place.
Krzanich, speaking in the Oval Office, called the investment an expansion of Intel’s presence in Chandler that will finish a plant — already under construction — capable of advanced 7-nanometer chip production. The Fab 42 facility will be completed in 3 to 4 years and create about 3,000 company jobs, Intel said in a statement following the meeting at the White House.
The chipmaker took a page from what has become a familiar playbook for technology and other companies: making a splashy announcement on investment and job additions after a high-profile huddle with Trump, who has threatened punishment for companies that shift operations overseas. Intel already builds most of its products in the US, at facilities in Oregon, Arizona and New Mexico, and part of the spending will come out of the chipmaker’s previously disclosed budget for new plants of about $12 billion this year.
In December, IBM Chief Executive Officer Ginni Rometty said she planned to hire about 25,000 people in the US and invest $1 billion over the next four years — an announcement made on the eve of a meeting of technology industry leaders with Trump. The president, in the run-up to his inauguration, also sought credit for Sprint Inc.’s commitment to create or bring back 5,000 jobs that the telecommunications company said are part of broader US hiring plans previously announced by Japan-based parent SoftBank Group.

HEAVY AUTOMATION
The massive facilities required to make advanced semiconductors in an economically competitive way don’t require heavy staffing. Chip plants are among the most automated factories on the planet. Their immense cost — more than $5 billion for a state-of-the art facility — comes from the expense of equipping them with that automation. Intel, like other chipmakers, typically locates its factories in areas where it can get tax breaks to offset some of the outlay.
“We’ve been working on this factory for several years. We’ve held off actually on doing this investment until now,” Krzanich said from the Oval Office. “It’s really in support of the tax and regulatory policies that we see the administration pushing forward that really make it advantageous to do manufacturing in the US”
The investment will also indirectly generate about 7,000 jobs in support of the facility, Intel said. The Chandler plant, when completed, will take its place among a worldwide network of Intel factories, which are also located in Ireland, Israel and China. The chipmaker, one of the founding companies of California’s Silicon Valley, has held onto its 15 percent market-leading slice of the $300 billion global chip industry through outspending rivals on research, development and plants over the years.
Fab 42 has been celebrated by presidents before. In 2012, Barack Obama made a speech in front of the building, which was then going to benefit from $5 billion of investment. Echoing language Krzanich used in the Oval Office Wednesday, Obama called it “a factory which will turn out some of the fastest and most powerful computer chips on Earth.”
“The factory being built here behind me is an example of an America within reach,” Trump’s predecessor called it at the time. “An America that attracts the next generation of manufacturing jobs.”
Intel’s decision to complete work on the plant now is likely based on industry dynamics. The company is under competitive pressure to move to more advanced production, and the factory was already built and just needed to be equipped.
“Now this announcement tonight is probably because of the semiconductor demand we have alluded to in great detail in recent weeks, more than it is about Trumponomics,” said Neil Campling, the London-based head of global technology, media and telecom research at Northern Trust Securities. “In this industry, talk is cheap until the production ramps.”
The Santa Clara, California-based company has about 106,000 employees around the world, with half of them located in the US The chipmaker’s staffing levels have stayed roughly unchanged through acquisitions.