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Intel production rate may have decreased

The site manager for Intel Corp.’s Rio Rancho plant recently indicated the site was running at full capacity, but a review of gross receipts and water usage statistics indicates a possible shift locally to slower sales and less water-intensive operations.

“Today we’re full, which is great,” site manager Kirby Jefferson said in a May 28 speech in Albuquerque. “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.”

International Data Corporation, in a forecast released last Wednesday, said it expects a 6 percent decrease this year in worldwide shipments of PCs, many of which are still put together with the 32- and 45-nanometer chips produced locally.

The local plant in Rio Rancho last underwent retooling in 2009, whereas other Intel facilities have converted more frequently to ever-smaller computer microchips, and might miss out on future opportunities for 10- and 7-nanometer chips.


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Between 2010 and 2013, according to a fact sheet and annual report on the company website, Intel plants in Arizona, Israel and Oregon stopped producing the two chip sizes that are now manufactured exclusively in Rio Rancho.

“While we are still serving a very large PC market,” local spokeswoman Natasha Martell Jackson wrote in an e-mail, “we’re also positioning ourselves for new markets, from mobile devices like phones and tablets, to connected devices in the ‘Internet of Things’ to servers to big data.”

When asked if manufacturing activity at the local plant had decreased, Martell Jackson wrote, “I cannot confirm any information regarding production levels, as that is typically not public information that Intel provides for any of its manufacturing sites.”

An Observer analysis found manufacturing gross receipts for unincorporated Sandoval County, where the Intel plant dominates the sector locally, and global revenue reported quarterly by the company have mostly moved in the opposite direction for the last several years.

Unlike a sales tax, a gross receipts tax is paid by a business that sells goods or services, rather than by its consumers.

The Observer consulted gross receipts data from the websites of the Bureau of Business and Economic Research at the University of New Mexico and the New Mexico Taxation and Revenue Department.

In the third quarter of 2009, the manufacturing gross receipts for unincorporated parts of the county were $51.2 million, according to BBER, while the Intel website indicated the company’s global revenue was $9.4 billion.

Two years later, in the third quarter of 2011, manufacturing gross receipts for the unincorporated portion of the county fell 67 percent, to $16.7 million, while Intel’s global revenue increased 52 percent, to $14.3 billion.


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Jefferson said the current chip production at the plant in New Mexico could last for two more years. What the local site produces after that depends on which direction the electronics market takes and how the company responds.

Jefferson also mentioned recent legislation, according to Martell Jackson, that “has helped level the economic playing field.”

In 2012, the state Legislature passed a manufacturing gross receipts deduction, phased in over five years, starting July 2013, and it’s expected to collectively save those firms in the state millions of dollars that they would otherwise owe in taxes.

The deduction has barely boosted manufacturing levels. From the third quarter of 2012 to the third quarter of 2013, the manufacturing gross receipts across the state increased 0.6 percent, from $2.20 billion to $2.22 billion, according to TRD.

Sandoval County saw a decrease. For the same one-year period, the manufacturing gross receipts in the unincorporated regions of the county decreased 12 percent, from $20.0 million to $17.5 million, according to BBER and TRD.

Starting this year, the Legislature has also allowed manufacturers to calculate their taxes with a single sales factor formula. The companies using that formula pay corporate income taxes on sales that occur in the state, rather than on all sales.

If Intel uses 25-38 percent less water for each chip it produces, as reported in its 2012 Corporate Responsibility Report, the local plant’s significant reduction in water usage, historically and recently, could indicate a slowing pace of chip production.

In April 1994, during an Office of the State Engineer hearing at which Corrales opposed Intel’s plans to drill wells nearby, the company estimated it would need 10.4 million gallons per day, before conservation, for its operations by January 1999.

In July 2012, according to Intel’s 2013 report to the State Engineer of well production and return flow, the local plant consumed 166.6 million gallons, for an average of 5.4 million gallons per day that month.

In February 2014, after Intel stopped purchasing municipal water and relied solely on its own wells for its water needs, Intel’s Rio Rancho facility used almost 72 million gallons, according to Martell Jackson, or about 2.6 million gallons per day.

Intel points to water conservation as one of the reasons why it has used fewer gallons per day locally.

“Approximately 30 percent of the water used in our factory is reclaimed and used to operate our air abatement equipment (scrubbers and cooling towers),” Martell Jackson wrote. “Intel New Mexico was the first Intel plant to use reclaimed water in its abatement equipment.”