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Intel on manufacturing plant buying binge?

The chip giant buys two fabrication facilities from Rockwell International, but it likely won't be the last purchase for Intel this year.

Intel announced today that it will buy an idle chip manufacturing plant in Colorado Springs from Rockwell International, but it likely won't be the last purchase for the chip giant this year.

A cyclical surge in the semiconductor market--driven by swelling demand for communications equipment, servers and other silicon-dependent products--is prompting chipmakers to invest heavily once again in factories, semiconductor equipment and employees.

The assets, two fabrication facilities ("fabs"), acquired from Rockwell will be used to manufacture flash memory, a key component of cell phones. Financial details were not disclosed.

Although Intel announced it would break ground on a new fab in Arizona earlier this month, these two deals are likely only the beginning for the company. Intel is planning to invest approximately $5 billion in fabs this year, according to Howard Hight, an Intel spokesman. Making the Rockwell plant operational will take an investment of approximately $1.5 billion, while the company will invest roughly 500 million in Chandler this year. That leaves an estimated $3 billion to go.

With the urgent need for new capacity, further acquisitions are likely. The industry suffered a downturn between 1995 and 1998 and forced many companies to mothball their fabs. One of the fabs in the Rockwell deal, built in 1996, was never used.

"It is going to be a heavy activity year for Intel," High said. "There are a bunch of (fabs) that are vacant and some are available for purchase."

The new facility will employ approximately 1,000 employees, similar to the number of employees to be hired for the upcoming Arizona facility. The Rockwell fabs will be outfitted with equipment to manufacture chips on the 0.18-micron manufacturing process.