Intel may have little choice in big manufacturing bet
Reuters – Fri, Jan 18, 2013 4:54 PM EST
The Intel logo is seen on a computer in New York May 13, 2009. REUTERS/Shannon Stapleton/Files
Symbol Price Change
AMZN 272.12 1.64
2330.TW 101.50 2.20
INTC 21.25 -1.43
AMAT 12.65 0.25
ASML.AS 51.57 0.08
By Noel Randewich
SAN FRANCISCO (Reuters) - Intel Corp's(NSQ:INTC) decision to spend $13 billion in 2013 to develop and build future manufacturing technology has not gone down well on Wall Street but it may be necessary if it wants to stay on top of rivals in coming years.
The top chipmaker's shares slumped nearly 7 percent on Friday, a day after executives said the company would increase 2013 capital spending from an already dizzying $11 billion.
Some analysts decried the move, saying adding new capacity should be far from Intel's mind in a waning personal computer market. Increased spending may further pressure margins and leave Intel with even more idle capacity if PC sales keep falling.
But others believe that Intel's top priority must be maintaining its technological edge, a costly but necessary endeavor that may even pay off in the long run with market share gains. Moving up the technology ladder can also deliver cost savings, helping safeguarding Intel's margins as it tries to catch up to rivals in smartphones and tablets.
"That's the bet they're making and they're all in," said Sanford Bernstein analyst Stacy Rasgon. "If you stop, TSMC and Samsung close the gap - and you're toast."
Of Intel's $13 billion capex this year, $2 billion will go toward expanding a fabrication plant, or fab, in Oregon where engineers will work on a long-term plan to manufacture microchips on silicon wafers measuring 450 mm - about the size of a large pizza.
Intel Corp's(NSQ:INTC) decision to spend $13 billion in 2013 to develop and build future manufacturing technology has not gone down well on Wall Street but it may be necessary if it wants to stay on top of rivals in coming years.
There were two reasons for INTC's stake in ASML:
1.) 450 mm (ASML was reluctant to support 450mm)
NVLS system leader in deposition was reluctant too - Intel pulled some strings and LAM Research (leader in etch) bought NVLS and the "new" LRCX combined with NVLS are a key (450mm) supplier.
Multi Patterning needs litho but also deposition and etch and that's why Intel pushed for LRCX/NVLS merger.
So Intel's move becoming serious about 450 mm is the logic second step after making the equity investment in ASML.
So I am baffled about WS chip "analysts" - they don't seem to get it
2.) EUV - will probably be late