The chipmaker will postpone opening a fabrication facility for making PC processors for a year because of current market conditions and the advent of larger, more economical wafers.
The Santa Clara, Calif.-based chip giant announced Wednesday that it will postpone opening Fab 24 in Leixlip, Ireland, from the second half of 2001 to the second half of 2002. The factory is being built to make microprocessors such as the Pentium 4. Additionally, the facility will handle larger 300-millimeter wafers rather than the 200-millimeter wafers used by companies to produce chips today.
The fab was one of a number of construction projects announced by Intel this year as part of an aggressive capital expansion. In the first half of the year, Intel found itself losing business opportunities because demand for both microprocessors and flash memory outstripped supply.
To squelch the problem, Intel began to acquire or invest in new plants in New Mexico, Massachusetts and Colorado, among other places.
In the second half of the year, however, sales slowed, giving the company less incentive to open a new plant.
Overall, Intel could reduce capital spending by more than 30 percent next year, according to estimates from Prudential Securities. Intel originally planned to spend $6 billion.
"Given the extraordinary PC demand uncertainty and certain near-term PC/processor inventory accumulations, we believe that Intel would likely be compelled to review its capacity ramp and technology mix for 2001," Prudential Securities analyst Hans Mosesmann wrote in a report released Wednesday. "While we could point to currency fluctuations and a worldwide economic slowdown as key culprits in a weakening in near-term demand, we do believe that PC growth is slowing relative to historical growth rates."
Delaying the Ireland plant will also let the company more aggressively gear up for 300-millimeter wafer production in 2002. These wafers, which have diameters measuring 300 millimeters rather than 200 millimeters, are far more economical from a production point of view. A single 300-millimeter wafer can produce roughly 225 percent more wafers, which leads to lower overall costs.
"The addition of a second 300-mm production fab to our factory roadmap will significantly improve our asset utilization and improve our production capacity for future generations of products," Mike Splinter, executive vice president and general manager of Intel's Technology Manufacturing Group, said in a statement.
"These new 300 mm fabs will feature advanced factory automation systems to significantly improve productivity and yields." Intel's first facility for the larger wafers is being built in New Mexico and will be operational toward the middle of 2002.
The Leixlip faclility, which will cost about $2 billion and include 135,000 square feet of clean room space, is part of a larger Intel industrial park in Leixlip.