Despite global economic conditions, Intel is shelling out $7 billion to upgrade their manufacturing facilities over the next two years. Last year, semiconductor sales dropped for the first time in seven years according to the Semiconductor Industry Association. Intel, itself, is closing plants in Malaysia, China, and the Philippines and halting production at other facilities in California. Some workers, however, are being offered relocation.  

While companies in the US, Europe, and Asia are announced plans to slash capital expenditures in an attempt conserve cash, Intel plants in the states of Oregon, Arizona and New Mexico will be newly outfitted to produce chips based on 32nm (nanometer) technology. Intel generates more than 75 per cent of its sales overseas, but does a similar per cent of its semiconductor manufacturing in the U.S. Its intent is to build faster, smaller chips that consume less energy. A 32nm is 32/billionth of a meter or about 1/millionth of an inch. Go figure how many would fit on the head of a pin.  

Intel CEO Paul Otellini told reporters that Intel spent about $5 billion on the previous technological transition. The additional $2 billion this go-round is because equipment for 32-nanometer production is more expensive. Otellini said some construction jobs will be created as the factories are outfitted with the new gear, but engineers and technicians are already in place, and they don’t anticipate further hiring.  

Every few years, chip companies make a multibillion-dollar switch to new equipment so they can produce chips with still smaller circuitry with more power. Intel says this investment is the most it has ever spent on such a transition. "Spending this money will lower our costs and give us more competitive products. It's something that's fundamental to our business model," Otellini said. Companies that produce chip-making equipment should also benefit from the expansion.  

Spokesman Chuck Mulloy said that instead of raising capital, Intel will rely on internal cash to bankroll the plan. Executive Vice-President Sean Maloney.says,"We recognize risk-taking is not a move that is common at the moment, but when you can build faster, cheaper, simpler, more attractive, and more compelling devices, it's a safer bet than you'd imagine."  

Challenged competitors continue to fall behind. This shift to a more efficient manufacturing process should put Intel farther ahead of its rival Advanced Micro Devices (AMD). "We're investing in America to keep Intel and our nation at the forefront of innovation," Otellini explains.  

AMD lost nearly as much over the past two years as Intel is pouring into their new venture. AMD’s shareholders haven’t responded to a vote to separate their factories into a separate company, in an attempt to upgrade their balance sheet and profit/loss statements. Intel’s news didn’t help their stock picture. Today, Intel fell 5.75 per cent, but AMD was hit harder, dropping 10.59 per cent. AMD is ramping up its 45nm production just as Intel is embarking on next generation 32nm chips.  

The first Intel processors to be built using 32nm technology are code named "Westmere" and will initially be used in desktop and mobile mainstream systems. In a sneak preview today in San Francisco, Intel was to demonstrate a fully functional 32nm based device – the first Westmere processor. X