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Intel Will Actually Close Plants

Intel Will Actually Close Plants

The filing didn't say which facilities would be closed, and there has been speculation that Intel's Rio Rancho plant could be slated for closure.

Announcement Comes After Speculation Rio Rancho Plant Could Be On the Chopping Block

BY DENNIS DOMRZALSKI

While Intel Corp. said earlier this week that it would slash 12,000 jobs in the next year and consolidate some of its operations, the reality is that it will actually close some of its facilities.

The company’s filing on Tuesday with the U.S. Securities and Exchange Commission laid out that reality in blunt terms. “Under the restructuring plan, Intel plans to close certain facilities and reduce up to twelve thousand positions globally, representing approximately 11% of Intel’s worldwide workforce,” the SEC filing said.

The filing didn’t say which facilities would be closed, and there has been speculation that Intel’s Rio Rancho plant could be slated for closure. The facility hasn’t had a major investment since 2009, and its workforce has been shrinking since the mid-2000s, when it totaled around 5,500. As of Jan. 1, the plant’s workforce was 1,900, down 400 from the previous year.

In 2004, Intel inked a $16 billion industrial bond agreement with Sandoval County. But the company has used only $6 billion of that bonding capacity, and its ability to sell bonds under the deal expires on Oct. 25, 2019.

Intel is trying to move away from making chips for personal computers and into chips for mobile devices such as smartphones and tablets. Demand for personal computers has fallen in recent years, and Intel is scrambling to changes its focus and restructure. The company is a latecomer to the mobile device chip game.

Arizona-based semiconductor industry analyst Brian McCarron said it doesn’t look good for the Rio Rancho plant. “When you look at where it sits in Intel’s overall manufacturing plans and the fact that it is clearly an older facility, and a facility that really hasn’t seen a lot of investment, between those two I have to imagine it’s on the short list,” McCarron said.

And, McCarron added, “Rio Rancho is the odd man out in that it is the city that is the furthest away from [Santa Clara, Calif.-based] Intel’s center of gravity in the United States.” In addition, newer chip factories, or fabrication plants, “don’t resemble the old fabs at all. They are designed to be automated, have a lower head count, and the equipment has changed radically compared to 10 or 15 years ago,” he added.

“Unfortunately, we are getting to the stage where technologies are becoming so advanced that facilities are being built from scratch rather than being retrofitted,” McCarron said.

Intel’s 2015 year-end SEC provides more information upon which people can speculate about the fate of the Rio Rancho plant. The company’s plants in Arizona, Oregon and Ireland have begun making 14 nanometer-sized chips—the latest technology—and plants in Israel, Arizona and Oregon are making 22-nanometer chips, also the latest technology.

And Rio Rancho? It’s making older technology 32-and 45-nanometer chips.

“As we move to each succeeding generation of manufacturing process technology, we incur significant start-up costs to prepare each factory for manufacturing,” the 2015 report said. “The costs to develop newer process technologies are significantly less than adding capacity by building additional wafer fabrications facilities using older process technologies.”

The filing also offered more information that could be used to speculate about the Rio Rancho plant: Intel has newer manufacturing facilities elsewhere that aren’t being used. In 2014 and 2013, the company built new plants in Arizona and Oregon that Intel said will enable it to maintain its technological lead. But, “a portion of the new Oregon and Arizona facilities are currently not in use and we are reserving the new buildings for additional capacity and future technologies,” the filing said.

In addition, in the second half of this year, “we will start using our facility in Dalian, China, to help expand our manufacturing capacity in next-generation memory,” the filing said.

The paragraph in the filing that talks about Intel’s future capacity plans doesn’t mention Rio Rancho.

In our March 25, 2015 issue, ABQ Free Press published a story citing many reasons for Intel wanting to leave New Mexico. One of those was Rio Rancho’s remoteness and its lack of sophistication and vibrancy compared to California and Oregon. “For whatever reason, their employees did not like coming to New Mexico,” former Sandoval County Commissioner Damon Ely told the newspaper. “It was not a desirable place because it didn’t have a lot of the big-city stuff like Phoenix had, or places in California.”

McCarron agreed with that assessment. “In the microchip world, it [Rio Rancho] is in the middle of nowhere,” he said. “It’s not appealing to the workers it’s [Intel] trying to attract. If the people they are trying to hire don’t want to go there, it makes attracting people kind of hard.”

Read our March 25, 2015 in-depth coverage here.

(Photo credit: money.cnn.com)

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Dennis Domrzalski is managing editor of ABQ Free Press. Reach him at dennis@freeabq.com.

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Dennis Domrzalski is managing editor of ABQ Free Press. Reach him at dennis@freeabq.com.

Latest posts by Dennis Domrzalski (see all)