Intel to invest $7B on factory upgrades

Intel intc plans to spend $7 billion upgrading its U.S. factories over the next two years, a sign that the recession hasn't extinguished chipmakers' lust for cutting-edge equipment.

The company's investment, announced Tuesday by Intel CEO Paul Otellini at a speech in Washington, speaks to the semiconductor industry's need to keep investing heavily, regardless of the poor economic climate that has led Intel to cut jobs.

The investment could be a boon to companies that produce chipmaking equipment and is another example of how Intel's deep pockets have kept rival Advanced Micro Devices at bay.

AMD, which has lost nearly $7 billion over the past two years, wants to break off its factories into a separate company to unload debt and save money. A shareholder vote scheduled for Tuesday was postponed until next week because only 42% of investors had voted. AMD needed at least half to go forward.

Santa Clara, Calif.-based Intel is struggling with the worst PC market in years. Overall semiconductor sales fell in 2008 for the first time in seven years, slipping about 3% to $249 billion, according to the Semiconductor Industry Association.

Yet Intel says its latest investment is the most it has ever spent on a transition to new manufacturing technology. Every couple of years, chip companies make the multibillion-dollar switch to new equipment that enables them to make chips with smaller circuitry, which lets them make each chip more powerful.

Intel said the $7 billion will pay for new machinery at factories in Oregon, Arizona and New Mexico, which will be outfitted to produce chips based on 32-nanometer technology. The most advanced chips now are made with transistors as small as 45 nanometers wide. Intel says 2,000 of those transistors would fit across the width of a human hair.

But Intel's investment doesn't necessarily mean lots of jobs will be created. The money will pay the salaries of about 7,000 "high-wage, high-skill" jobs that already exist. Otellini said some construction jobs will be created as the factories are outfitted, but that Intel wanted to deploy the technology in facilities where the company already had lots of engineers and technicians, to speed the time to market.