Feb. 10, 2009 – Intel’s latest announcement that it’s spending $7B over the next two years to push 32nm manufacturing capabilities in its three main US sites is certainly welcome news in lousy economic times — but what does it really mean? Analysts weigh in.
The $7B in spending flagged over the next two years will focus on existing sites in Oregon, Arizona, and New Mexico; in a statement the company pointed out that while 75% of its sales are shipped out of the country, 75% of its manufacturing and R&D/capex investments are domestic. First processors built with 32nm technology — code-named “Westmere,” incorporating Intel’s Nehalem architecture and integrated graphics capabilities, and targeting desktops and mobile devices, are expected to ramp later this year.
The pledge to spend billions comes just weeks after the company said it would shutter its D2 facility in Santa Clara, CA, and halt production at its Fab 20 200mm site in Hillsboro, OR; also being closed are three assembly test facilities in Asia. Total workforce attrition will be 5,000 to 6,000 jobs.
When does a $7B splash make few waves? When it’s talking about something we already know, and is smartly (but transparently) timed for maximum buzz.
Intel has openly stated that it plans to spend primarily on 32nm manufacturing in 2009 with an eye toward ramping in 2010 or sooner. “Getting the first capability on 32nm is key to our strategy, and we’re going to get there as quickly as possible,” said CFO Stacy Smith during Intel’s last quarterly analyst teleconference. And Deutsche Bank’s Stephen O’Rourke is among many analysts who project the chipmaker’s 2009 capex will be lower than the $5.2B it spent in 2008. So the $7B (divided over two years) isn’t really new funds, but shedding slightly more light on what was already known/anticipated.
A quick poll of industry watchers to this $7B announcement generated muted response, to put it mildly. “It is old news,” commented Dean Freeman, research VP at Gartner, adding that it’s clearly timed to coincide with this week’s ISSCC conference where Intel is talking up its 45nm and 32nm processors. Moreover, he said, “it also shows that Intel is not immune from the downturn” — Gartner projects Intel’s capex will be down 20% in 2009 even with the ramping of its 32nm technology. Craig Berger, analyst with FBR Research, echoed that the investments are “encapsulated in the firm’s 2009 capex guidance” and that it’s “nice PR,” but won’t have a material impact on investors’ views.
There is something to be noted from the PR, though. Freeman pointed out that the announcement does indicate a broader push to invest in US technology and manufacturing, while other chipmakers are moving to a fab-light strategy (see: AMD) and contracting with overseas firms in Asia.