Intel Tables New Arizona Fab, PC Slump Casualty?

Intel (INTC) has postponed opening a new chip factory in Chandler, Ariz., an ambitious $5.2 billion project intended to bring its most advanced, high-capacity manufacturing plant and 1,000 jobs to the local economy.

According to a report in the Arizona Republic, the plant, referred to as Fab 42, was slated to kick off production at the end of 2013 to build Intel’s advanced chips. In delaying the operation, however, Intel pulled back the reins on its capital outlay, electing not to outfit the facility with costly manufacturing equipment and tools that would have eaten up about two-thirds of the chipmaker's investment.

Was the PC industry's perpetual slump the reason for the plant remaining closed?

Intel said the facility, which it positioned as the most advanced, high-production semiconductor manufacturing factory in the world, will remain shuttered for an indeterminate period.

"The new construction is going to be left vacant for now and it will be targeted at future technologies," an Intel spokesperson told Reuters.

Which technologies Fab 42 will manufacture and when it will begin operations hasn’t been decided, but its presence is “an indication to the community that we have significant investment in place for future growth in Arizona,” the spokesperson said.

Since construction on the plant began some two years ago, Intel has hired more than 1,000 employees targeted for the facility, benefitting from some $3.3 million in tax credits for job creation.

Three other factories at the Chandler site with existing 22nm manufacturing equipment are being upgraded to also make chips at 14nm, Intel said. Many of the new workers have been shuttled off to those plants.

Intel suggested it held off on launching Fab 42 over questions of how to allocate its capital most efficiently. But the continued deep slump in PC sales certainly didn’t help, with desktop and laptop shipments for 2013 contracting 10 percent year-over-year, according to researcher IDC’s figures.

According to the Arizona Republic report, Intel employs about 11,900 full-time employees at its two Chandler campuses, up from 9,700 prior to the new plant’s construction.

“It doesn’t matter which building they work in—we’ve already increased the workforce by more than 1,000 people at that work site,” the spokesperson said.

Intel said the scheduled opening of its $300 million R&D facility in Chandler remains on track for sometime in the next six months.