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Intel to open another plant in Arizona

The chip giant will start to break ground on a new fabrication facility in Chandler, Ariz., designed to allow it to adopt some of the latest silicon technology.

Intel will start to break ground on a new fabrication facility for semiconductors in Chandler, Ariz., a $2 billion investment designed to allow the company to adopt some of the latest silicon technology.

The Arizona fab will essentially become Intel's first factory for mass producing chips out of 300 millimeter wafers, said Mike Splinter, senior vice president at Intel. Today's silicon wafers measure 200 millimeters in diameter. By moving to the larger wafers, costs will drop while the number of chips produced per wafer will increase by around 30 percent.

"We will be able to get two times the units out of the same floor space," Splinter said. When the site goes live, Intel will have more than 13 fabs, a spokesman stated.

While semiconductor companies often tout scientific breakthroughs or innovative designs, financial success is often determined by fab management. These factories, which can employ 1,000 or more workers, represent huge capital investments. The majority of semiconductor companies today, in fact, don't own fabs but instead hire foundries such as TSMC or IBM to manufacture their chips or sell their designs to other companies, which in turn make chips.

Under-utilized capacity can lead to financial losses and high chip prices. In 1998, Intel temporarily shut two fabs and curtailed head count during a PC slowdown. These factories generally run 24 hours a day, shutting down for one or two holidays a year.

"The more efficient your fab, the better your profits," said Dean McCarron, a principal analyst at Mercury Research.

By contrast, a fab that is running at near capacity becomes a useful tool in price wars, because fixed costs are spread more thinly across the total output of product. Increased fab capacity also makes it easier to fix bugs. In the past, one of AMD's problems has been a lack of fab capacity, analysts have said. The company's upcoming fab in Dresden, Germany, which will also make copper processors, is expected to alleviate some of those problems.

The Chandler fab will also be Intel's first to produce processors containing copper transistor wires, rather than aluminum, which will boost chip performance. These chips will be made on the more advanced 0.13-micron manufacturing process. Although other companies have jumped to copper already, Intel maintains that it will be one of the first to take advantage of 300 millimeter wafers on a large scale.