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For Intel, Obama's visit comes at pivotal moment

President will visit an Intel fabrication facility in Oregon tomorrow, as the chipmaker's PC-centric manufacturing faces challenges from large, Asia-based, smartphone-savvy chip rivals.

President Obama's attendance on Friday at a groundbreaking ceremony for an Intel manufacturing facility in Oregon comes at a critical moment for Intel, whose PC-centric chip manufacturing is being challenged by large, smartphone-centric Asia-based rivals.

The world's largest chipmaker announced last year that it would spend between $6 billion and $8 billion on U.S.-based manufacturing in Oregon and Arizona. Primarily targeted at building processors for the next generation of laptop, desktop, and server computers.

Obama is scheduled to attend a ceremony, hosted by Intel CEO Paul Otellini, for a future Intel plant that taps into some of that money. Called a development "fab," or fabrication facility, the future factory codenamed "D1X" is targeted at chips with geometries as small as 14 nanometers, according to Intel spokesman Chuck Mulloy. That's as cutting-edge as chip manufacturing gets and underscores why Intel is the world's largest chipmaker.

How cutting-edge is a 14-nanometer manufacturing process? Intel's latest chips announced in January use a 32-nanometer production process. Its next-generation chips will use a 22-nanometer process. So, this is a next-next-generation facility. Generally, the smaller process geometries, the more advanced the manufacturing is. "We expect that fab to begin producing and developing that process in 2013," Mulloy said.

Intel's s planned 14-nanometer D1X facility at its Hillsboro, Ore., complex, which President Obama will visit on Friday.
Intel's planned 14-nanometer D1X facility at its Hillsboro, Ore., complex, which President Obama will visit on Friday. Intel

High-tech manufacturing in the U.S. has become an increasingly rare phenomenon in an age when make-it-in-China has become de rigueur for U.S. companies. Obama has been a proponent of U.S.-based manufacturing (PDF) and sees U.S. factories as a way to create badly-needed jobs. The Obama Administration's effort to save General Motors--and its satellite of U.S.-based manufacturing sites--is the most prominent example to date.

"Intel has committed to investing more than $6 billion in their U.S.-based manufacturing facilities to support future technology advancements in Arizona and Oregon, creating more than 6,000 construction jobs and more than 800 permanent high-tech jobs," a White House official said in a statement. "The meeting is a part of our ongoing dialogue with the business community on how we can work together to win the future, strengthen our economy, support entrepreneurship, and get the American people back to work."

That is uplifting language, but Intel is now facing a growing number of consumers arming themselves with iPhones, iPads, and Android phones and tablets. Those devices and the chips inside are made in Asia by manufacturing Goliaths such as Samsung, Taiwan Semiconductor Manufacturing Company (TSMC), and Foxconn.

And that Asia-based manufacturing is being driven in no small part by U.S. companies like Apple, Hewlett-Packard, and Dell. "You have to have the manufacturing close to your customers," said Vivek Wadhwa, a senior research associate with the Labor and Worklife Program at Harvard Law School. He argues here that U.S. companies typically get most of their revenue abroad--which is also the case for Intel--and therefore must manufacture abroad.

Intel argues, however, that though it sells most of its products overseas 75 percent of its manufacturing in the U.S. And it is purely practical for Intel to manufacture chips in the U.S. because it has built up a cadre of highly skilled workers here.

Needless to say, Intel believes that work force should be gainfully employed for a while yet. The PC industry hit a milestone this year of 1 million PCs shipping per day and Intel's fabs in the U.S. will supply the processors for the vast majority of those computers, as well as for growing markets like embedded devices, used in cars and medical equipment.

The challenge for Intel is how much and how fast consumer tastes will change. "We see an emerging class of ultramobile devices," Otellini said at Mobile World Congress in Barcelona, Spain, on Tuesday. And he cited a "seminal event" in the fourth quarter, when smartphone shipments passed PC shipments for the first time.

Intel's continuing mantra is that consumers will use both an Intel-based PC and a mobile device as it feverishly tailors future silicon for small devices. "No single device wins," Otellini said. As Intel is one of America's last standing major chip manufacturers, Obama can only hope that Otellini is right.

The president will also get briefings on Intel's science and math education programs--since education is another big theme for Obama. Intel hands out about 100 million dollars a year in science and math contributions for education.