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Updated: Thursday, Mar. 26, 1998 at 07:26 CST
Intel delays plant debut to 2002
By Bill Bowen
Star-Telegram Staff Writer
Construction on Intel Corp.'s $1.3 billion microchip plant near Alliance Airport has been abruptly halted and the plant's opening pushed back two more years to 2002, company officials confirmed
last night.
For at least the next 12 months, the 530-acre site will lie dormant, Intel officials said.
The delay will allow the company, stung by lower-than- expected sales and sagging profits, to reconfigure the plant to produce the new-generation 300-millimeter silicon wafers, said Howard
High, an Intel spokesman at the company's Santa Clara, Calif., headquarters. That product will replace the 200-millimeter silicon wafer that is now the industry standard and give the plant a 30
percent increase in production efficiency.
"The options were to continue with existing technology or moving on the technology that is two generations in the future," High said. "Intel has decided long ago that we didn't want to go to a new
technology and have to retrofit the plant."
Even as Intel officials confirmed the second delay in five months, they reiterated their commitment to the project, in which the company has already invested more than $75 million.
But the delay will probably increase the cost of the plant -- now opening three years later than first planned -- and could jeopardize Intel's huge tax abatement with Fort Worth, by far the largest ever
approved by the city.
Intel had agreed to begin construction of Phase 1 of the plant during 1997 and "substantially complete" the project "within 24 months," according to the abatement agreement, approved on a 5-4 vote by the Fort Worth council one year ago yesterday. The agreement affords the company as much as $117 million in property tax abatements for the facility just north of Alliance Airport on the northwest corner of Interstate 35W and Eagle Parkway in far north Fort Worth.
The company notified city officials late yesterday of the delay, said Michael Jacobson, external affairs manager for Intel Texas.
"We're going to be sitting down with the taxing entities and see what adjustments we need to make," Jacobson said.
Fort Worth officials could not be reached last night regarding the potential effect of the project's delay on the abatement agreement. But Mayor Kenneth Barr said earlier yesterday that he does not
believe that the Intel construction project will be terminated.
"We know of no plan for them to kill the project," he said. "I anticipate Intel will complete this facility."
News of the latest delay surprised officials of Denton County and Northwest school district, which have also granted tax breaks to the company.
Denton County Commissioner Jeff Krueger said late yesterday that he was unaware of Intel's second delay. Denton County approved a 78 percent tax break that would save Intel about $25 million in property taxes over 18 years.
"If they want to wait two years, they still are going to be a major player in the market and Denton County," Krueger said.
The plant delay will not affect Denton County's tax deal with Intel, because the agreement does not take effect until the plant is "on the tax rolls," Commissioner Scott Armey said.
Officials in Northwest school district also said they were unaware of any change in plans.
"I haven't heard the first thing," said Larry Hutto, president of the Northwest school board, which granted the company a five-year tax break amounting to about $9 million. "All that I know is that our
agreement with them has not wavered."
In late October, Intel announced that the plant opening would not occur until late 2000, a year behind initial projections. Company officials attributed that delay to decision to have its Israeli plant make the logic memory chips that were to be made at the Fab 16 plant in Fort Worth.
Intel's latest delay comes as the chip manufacturer pushes a proposal in Austin for a series of multimillion-dollar sales and business tax breaks.
The plan would give Intel -- along with other high-tech and capital intensive industries -- state tax credits for expenditures such as investments in expensive manufacturing equipment, donations to
schools and spending on research and development.
The company, along with other microchip manufacturers, has been hit by a slump in demand.
Three weeks ago, Intel warned that its first-quarter profits and revenue will fall below expectations because of sluggish orders for its microchips.
The March 4 announcement did not offer specific earnings projections.
But the company said its first- quarter revenue should be about $5.9 billion, a 10 percent drop from the same period last year. The company had earlier predicted a slight rise in the current quarter.
Analysts had expected Intel to earn 93 cents per share in the first quarter before the announcement, already below its performance in the 1997 first quarter, according to a First Call survey.
But Intel's High said the latest delay has nothing to do with the slumping sales figures.
"The investment in Fort Worth is targeted at the long-term success of the company," High said.
Intel officials said the company has spent about $70 million on land and construction so far. The company has also contributed more than $4 million in computer equipment and technology to Northwest school district, $1 million to Fort Worth schools and $850,000 in equipment to Tarrant County Junior College.
"The key is that Intel is committed to Fort Worth," Jacobson said.
Rick Patterson, president of Ross Perot Jr.'s Hillwood Development Corp., called the delay a short-term disappointment but a long-term benefit to the region. Hillwood was involved in negotiations to bring Intel to the area and sold the land for the plant.
"The fact that they will bring technology to Alliance that doesn't exist anywhere in the world today is the biggest stamp of approval we could ask for," Patterson said.
"This could be a significantly bigger investment, which would bode well for this whole region."
Hillwood is developing a technology park to serve computer firms and suppliers for Intel on the east side of I-35W. Patterson said the delay should not hamper that project.
"We'll just have to change our marketing pitch," Patterson said.
Barr said the rapid changes in the micro]chip industry apparently have made it difficult for Intel to establish a fixed timetable for the Fort Worth project.
"There are major changes going on in the computer chip industry, including new technology, and one of their challenges is to start this new facility with the latest technology. And the buildings must be
built for that technology," he said.
Intel has said that -- depending on the state of the business -- the Fort Worth plant could eventually employ up to 8,000 workers if all three development phases are completed. The company is expected to hire 1,000 workers within its first five years of operation.
Technician base salaries are expected to begin at $28,000 a year, with bonuses added, Intel officials have said.
Staff writers Andrew Backover, Jack Z. Smith, Miles Moffeit and Scott Fagerstrom contributed to this report.
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