Intel to invest $7 billion in U.S. as recession deepens

NEW YORK/SAN FRANCISCO (Reuters) - Intel Corp (INTC.O) plans to invest $7 billion over two years to build next-generation U.S. chip manufacturing plants, unveiling its biggest spending plan for new technology amid a deepening economic recession and huge internal job cuts.

Intel, larger rival to Advanced Micro Devices (AMD.N) in the business of making computer microprocessors, wants to make faster, smaller chips that consume less energy.

Analysts say the spending plan did not surprise markets, as it came on the heels of Intel's announcement it would begin ramping up its operations to produce chips based on 32-nanometer circuitry by 2009's final quarter, and was in line with the firm's annual capital expenditures.

Spokesman Chuck Mulloy said the firm would not raise capital but rely on internal cash to bankroll the plan, which the firm called its largest-ever investment for a new manufacturing process.

Intel, which said in January that its 2009 capital spending would be flat to slightly down from 2008's $5.2 billion, had more than $8.68 billion in cash, cash equivalents, and short-term investments at the end of 2008.

"You never save your way out of recession. You invest your way," Mulloy said.

The global chip-making industry is struggling through what may be its worst-ever downturn.

AMD, Intel's distant rival, has announced 1,100 job cuts as demand for personal computers continues to crumble. The U.S. firm, which last month posted a wider-than-expected quarterly loss, is now trying to spin off its manufacturing operations into a foundry -- or chip-making -- firm.

Mulloy said Intel hoped to manufacture the new chips in larger volumes than previously planned to get them into mainstream products -- such as PCs -- quicker. He did not elaborate on time frames.

Shares in Intel slid 4.6 percent in the afternoon while the Nasdaq composite index .IXIC fell 3.8 percent.

INVESTING THROUGH THE DOWNTURN

Intel's investment will be apportioned among existing manufacturing sites in Oregon, Arizona and New Mexico and will support about 7,000 jobs at those locations. The company said its workforce in the United States is about 45,000.

Its announcement comes less than a month after the world's largest maker of microprocessors used in personal computers said it would close plants in Southeast Asia and scale back U.S. operations under a restructuring that affects as many as 6,000 employees.

The investment funds deployment of Intel's 32-nanometer manufacturing technology. Intel had been planning to switch from the larger, less efficient 45-nanometer technology.

"Intel has already guided capital expenditures to roughly $5 billion in capital expenditures for 2009, so there is nothing new about this," said Daniel Berenbaum, an analyst with Auriga USA.

Mulloy added that Intel was continuing to make investments around the world, including in a new assembly test facility in Vietnam and a new factory in China.

(Editing by Edwin Chan and Brian Moss)