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Intel: Down in the Silicon Valley


Semiconductor firms move overseas.

Intel (INTC) says it plans to close several old factories, including a long-established site in the Silicon Valley.

The closure will mark the end of Silicon Valley as a manufacturing center for the company. Instead, Intel and other chipmakers including Nvidia (NVDA), Altera (ALTR) and Xilinx (XLNX), will use their Silicon Valley sites to design, develop and market the next generation of chips while manufacturing will be shifted overseas, especially to Asia.

The flight of manufacturing from the Santa Clara Valley is a continuing trend. When Silicon Valley -- generally located between Palo Alto and San Jose -- boomed after World War II, it was largely agricultural and known as Blossom Valley. Before the high-tech invasion, spring tours of the orchards in bloom were popular.

But agriculture has nearly disappeared, the land is no longer cheap and neither is labor, forcing semiconductor companies to contract fabrication plants overseas.

Intel plans to close a factory at its headquarters in Santa Clara as well as in Hillsboro, Oregon, Malaysia and the Philippines. About 6,000 workers will be affected and some will be offered jobs elsewhere in the company.

Intel operates new plants in New Mexico, Oregon, Arizona, Ireland and Israel.

Competitor Advanced Micro Devices (AMD) moved its production to Germany, enticed by government tax breaks.

Slowing worldwide demand for semiconductors has forced manufacturers to operate plants below capacity, making them less profitable. This sealed Intel's decision to close older plants to remain competitive.

Intel hasn't reported a net loss since 1986, but the first quarter looks dicey and lower earnings were undoubtedly a factor in the decision to close the older plants.

The general press may declare Silicon Valley dead, following Intel's decision to close a manufacturing plant at its headquarters. Don't believe it: The dynamic area is always changing, a fact many in the dead-tree press refuse to accept or simply can't comprehend.
No positions in stocks mentioned.
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