Elmer - Re: "- Did you see a news release earlier this week saying Intel halted construction on a portion of their Colorado Springs Flash fab?"
Yes - it was a strange article - clearly written to put an ugly spin on Intel. It was written very negatively - and only in a back-handed fashion did they admit that Intel had COMPLETED 60,000 sq. of Clean Room to start Initial equipment and process qualification.
"Intel expects to begin testing equipment in one 60,000-square-foot section of the plant in March before starting chip production within the next three months. Company officials said they moved the testing to March because of a shortage of construction workers. "
The rest of the article focuses on not completing the ENTIRE FAB - and not on the completion of a major portion of it.
Here is the article I think you are referring to - read it carefully.
Paul
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denverpost.com
Intel waiting to complete Springs plant
By Tom McGhee
Denver Post Business Writer
Feb. 7, 2001 - Chip giant Intel Corp. will delay finishing a portion of its plant in Colorado Springs to consider whether to make an even-faster chip.
It's the second delay the company has announced since last fall.
Intel spokesman Chuck Mulloy said he couldn't predict when Santa Clara, Calif.based Intel would complete work on the former Rockwell plant.
By waiting on the project, the company hopes to get the best possible return on its investment, Mulloy said. Intel has the technology to build flash memory chips at the Colorado Springs plant, but new technology may be just around the corner, he said.
Flash memory is installed in cellular phones, pocket PCs and other gadgets.
"The question that we have to answer is do we want to put in the old and then retrofit for the new," Mulloy said.
But it could be as many as three years before technology exists to produce circuitry needed for the beefed-up chips, said Dan Scovel, an analyst with Needham & Co. in New York City.
Mulloy questioned Scovel's time frame, saying it would only be accurate if the technology wasn't already under development.
"It is," Mulloy said.
Several analysts said delaying completion makes sense at a time when demand in the semiconductor market has slowed.
Intel was supposed to begin testing equipment in its $1.5 billion plant in November, but it moved that deadline back to March.
"At some point in the future when the market shows signs that it is starting to recover, that's when they will start to invest in new equipment," said Jermey Lopez, an analyst with Morningstar in Chicago.
Mulloy denied that cooling market conditions have anything to do with the delay.
Intel expects to begin testing equipment in one 60,000-square-foot section of the plant in March before starting chip production within the next three months. Company officials said they moved the testing to March because of a shortage of construction workers.
The delay in installing equipment in the other section won't affect the 1,100 Intel employees already working there, said Deana Sauceda, Intel's spokeswoman for Colorado Springs.
On Tuesday, about 2,800 construction workers were on site. That number will dwindle over the next few months, Sauceda said.
Intel hasn't told construction crews when their jobs will end, said Mark Johnson, business manager for the International Brotherhood of Electrical Work ers Local 113.
"The company never tells you anything," Johnson said.
The chip maker has already developed a new circuitry that is smaller and can make chips run faster, but it's only useful for producing microprocessing chips for computers, not for the flash memory chips made in Colorado Springs.
"Demand for flash memory was a barnburner in 2000, but it has cooled off," said Justin Burgin, an analyst with H&R Block Financial Advisors in Detroit.
While the flash memory market grew 130 percent last year, growth this year isn't expected to go above 60 percent, said Jack Geraghty, an analyst with Gerard Klauer Mattison in New York City.
That's still strong, but demand for other semiconductors has fallen off far more.
Intel's revenue growth - about 15 percent over 1999's in 2000 - is expected to be much lower in upcoming quarters, Geraghty said.
To increase profits, the compa ny should reduce the cost of its microprocessing chips used in computers, and it can do that by using the new technology, Geraghty said.
So it makes sense for the company to funnel resources toward those chips and away from flash memory, he said.
One analyst disagreed that slumping demand could be responsible for Intel's decision. The company is probably figuring out the best way to use resources in a market that evolves rapidly, said Hans Mossesmann, managing director of semiconductor research at Prudential Securities Research in Menlo Park, Calif.
Intel recently said it expects to spend $7.5 billion on capital projects this year - almost $1 billion more than last year. Regardless of the reason for the slowdown, all of the analysts said they expect Intel to continue its presence in Colorado Springs. Rocky Scott, president of the Greater Colorado Springs Economic Development Corporation, said he doesn't expect the delay will hurt the region's economy.
The plant will have a stronger future if the company waits until the next generation of equipment is available, he said.
Construction workers who lose their jobs will be able to find work on road projects or other jobs going on throughout the state, Scott said.
"There is an enormous amount of infrastructure being built now," he said.
But companies such as Process Specialties, a Denver business that supplies Intel with gauges and other equipment, will lose money, said Cy Cajthaml, the company's president.
Intel makes up $40,000 to $50,000 of his monthly sales, he said.
He had expected to supply Intel until the end of 2002, but now has concerns that that won't be the case. He doesn't expect any layoffs at his company, which employs 80, as a result, however.
"We didn't have the work a year and a half ago, so we'll just go out and look for more," Cajthaml said.
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