Intel Reveals Plans For $3 Billion Expansion
Intel Corp. unveiled plans to spend more than $3 billion on three new factories Friday, becoming the latest example of the computer chip industry’s unparalleled spending spree to meet growing demand.
Intel, the world’s largest maker of semiconductors, will build new plants in Israel, Ireland and Malaysia. Other manufacturers, including Samsung and Fujitsu, are also spending billions of dollars to expand existing plants or build new ones.
The huge capital spending is a sign the industry has become less vulnerable to economic swings, said Dan Hutcheson, president of VLSI Research Inc., a San Jose research firm that specializes in the economics of the chip industry.
“This is unprecedented,” Hutcheson said. “For the first time, we’re seeing that it is turning out to be much less cyclical. I think the big difference is that computers used to be a discretionary buy. But now you wouldn’t think of hiring a person without buying him a computer.”
Intel, based in Santa Clara, Calif., plans to spend $1.6 billion on a plant that will open in 1998 at Kiryat Gat, Israel, about 35 miles from Jerusalem. It will make advanced flash memory products, increasingly used in personal computers but also common in smaller electronic devices.
The company also will build a $1.5 billion plant at its complex in Leixlip, Ireland, just outside of Dublin. The factory, also set to open in 1998, will be used to build future-generation microprocessors.
And in Malaysia, Intel’s plant at Kulim Hi-Tech Park will build motherboards and communications boards for personal computer manufacturers. Intel already runs an assembly and testing center about 30 miles away at Penang.
The Kulim factory, due to open in 1996, still is the subject of negotiations, Intel said. The company did not disclose its price.
“Industry experts are predicting that personal computer sales will reach 100 million units per year before the end of the decade,” Craig Barrett, Intel’s executive vice president and chief operating officer, said in a statement.
“We are taking steps to assure that Intel will be able to meet the demands of a rapidly growing market,” he said. Worldwide PC sales of 55 million to 60 million units are expected this year.
Intel has spent $17 billion over the past decade on research and development and new plants.
The company just completed a $1 billion factory in New Mexico. It currently is building new plants in Arizona, Oregon, Washington state and at its Santa Clara headquarters. A small testing facility is being built in Shanghai, China.
Among the capital plans of other chip companies, Motorola Inc. recently bought land near Richmond, Va., to build a $3 billion semiconductor factory and plans to spend $720 million to expand operations in China.
Fujitsu plans to spend $1.26 billion to double the capacity of its memory chip plant in England, and Samsung expects to build a $1.5 billion plant near Austin, Texas. Toshiba and IBM are joining to build five factories costing a total of $6 billion.
But semiconductor manufacturers still aren’t keeping pace with the buying binge of computers and products that increasingly rely on processing and memory chips.