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Intel NM loses next-generation investment

Copyright © 2014 Albuquerque Journal


Intel Corp.'s Rio Rancho operation has been passed over again for next-generation nanometer chip technology, but the plant remains an integral part of the company's global production chain, according to New Mexico site manager Kirby Jefferson.

The plant, which employs about 2,800 people, was in the running for Intel's forthcoming rounds of investment in 10-nanometer chips. That next-generation technology will follow the 22-nanometer chips now under production in other places and 14-nanometer chips Intel already is investing in at plants in Ireland and Arizona.

But New Mexico is no longer in the running, Jefferson told local business leaders at the Albuquerque Economic Forum on Wednesday morning.

And it's uncertain if the local plant can compete for future investment in 7-nanometer chips, which will follow the 10-nanometer ones in a few years.

“This site was not selected for the 10-nanometer chips, that's for certain,” Jefferson said. “They will do it at other facilities. Seven nanometer is the next one, and we still don't know where that will be.”

This is the third time New Mexico has been passed over for next-generation chip technology. The Rio Rancho site currently produces 32-nanometer chips, following a $2.5 billion investment in 2009 to upgrade the plant from 45-nanometer technology.

Now, being three cycles behind the curve makes it more difficult to compete for next-generation chips.

“The investment would have to be extremely high here, because we're so far behind,” Jefferson said.

Still, the local plant remains critical to Intel's global future, because it continues to produce chip technology that is integral to nearly every product the company makes. In fact, the Rio Rancho site is operating at maximum capacity and is projected to continue at that pace for at least two more years.

“Today we're full, which is great,” Jefferson said. “It's not leading-edge technology, but it's still pioneering technology, and we have a full supply – meaning more than capacity – for the next 18 to 24 months.”

In addition, the company expects the local plant to remain relevant for many years to come, Jefferson said, stressing that constant rumors of the New Mexico factory shutting down or being sold off to another company are baseless.

“The New Mexico plant is front and center with what's going on at Intel,” he said. “Intel is committed to this community. The thinking all the way up the chain is to keep this operation going.”

Intel has been under pressure globally in recent years, because the chipmaker – which has dominated the personal computer industry for decades – was slow to get into mobile computing markets and is now playing catch up.

And with worldwide PC sales on the decline since 2012, company revenue and profits have been under pressure, leading to an announcement early this year that Intel would reduce its global workforce by about 5,000, or roughly 5 percent of the 108,000 it employed as of January.

The company began cutting its employee base in New Mexico last fall by about 400 positions.

Silver lining

Nevertheless, some of the market changes now shaking the computer industry could actually boost Intel's long-term stability in New Mexico.

For example, the traditional focus on progressively reducing the nanometer size of transistors on chips, which increases processing power, is less important in today's mobile computing world, where the industry instead needs energy-efficient chips that last longer on a single charge.

That makes the lack of New Mexico upgrades to smaller nanometer technology less important, given that Rio Rancho is heavily involved in designing and producing many products, including chips for mobile computing.

“Nearly 40 percent of Intel's revenue now is associated with products beyond the PC,” Intel spokeswoman Natasha Martell Jackson told the Journal . “When we're talking about the capabilities of a site and what can be done there, a wide variety of things are emerging from changes in the market and industry evolution. We have an opportunity to play a role in that wider ecosystem and continue to be relevant here in New Mexico.”

Doug Brown, dean of the University of New Mexico's Anderson School of Management, said he's “cautiously optimistic” following Jefferson's speech.

“You have to appreciate the velocity of changing cycles in high-technology businesses like Intel. It's remarkable to me how, given its size, Intel remains so nimble and able to respond so quickly and boldly to today's economic challenges,” Brown said.

“I believe Intel's top brass recognizes the importance of the plant here, and local executives like Jefferson are taking up the challenge to land new opportunities as the company evolves.”