Intel chief executive Brian Krzanich on Wednesday announced a $7bn investment in US manufacturing alongside President Donald Trump at the White House, as the chipmaker pledged to complete an Arizona plant on which it started work in 2011.
Fab 42 will create 3,000 high-tech jobs and support 10,000 jobs in Chandler, Arizona when it is completed in three or four years’ time.
The carefully choreographed announcement in the Oval Office, chiming with the new president’s focus on job creation, came despite Intel’s opposition to his immigration order. The chipmaker signed an amicus brief over the weekend alongside more than 100 other tech companies, supporting legal action against the controversial travel ban on citizens of seven Muslim-majority nations.
“Engaging is better than not engaging,” Stacy Smith, Intel executive vice-president for manufacturing, operations and sales, told the Financial Times in an interview on Wednesday. He said the investment decision had been made “independent of the administration”, despite the photo call.
Many in Silicon Valley are grappling with the same balancing act between the Trump administration’s potential to cut taxes that could improve their businesses, while challenging it on immigration and other social issues. Elon Musk, the Tesla and SpaceX chief, has remained on the president’s business advisory council despite criticism — even as Travis Kalanick, Uber chief executive, stepped down from the council after a campaign to “#deleteUber” cost the ride-hailing service thousands of customers in protest at Mr Kalanick’s perceived endorsement of Mr Trump.
Mr Smith said Intel employees “understand there are places where we disagree” and “respect the fact that we have been clear and vocal in our disagreement”.
Last summer, Intel cancelled a planned fundraiser with Mr Trump, then the presumptive Republican nominee, after criticism from inside and outside the company. While saying at the time he was “passionate” about US manufacturing and making the country “competitive in tax”, Mr Krzanich tweeted: “I do not intend to endorse any presidential candidate.” The Trump campaign later said the meeting was cancelled due to a scheduling conflict.
Sitting at his desk in the Oval Office on Wednesday, Mr Trump hailed Intel as a “great, great company”. Mr Krzanich said Intel had been “disadvantaged” in the past by US regulations and tax policies as it competes with rivals “across the world”.
The Silicon Valley company is among America’s top exporters. Its former chief executive Andy Grove was a Hungarian who fled Nazi occupation and Soviet repression in the 1950s to come to the US.
“Intel is very proud that the majority of our manufacturing is here in the US and the majority of our R&D is here in the US,” Mr Krzanich said, “while over 80 per cent of what we sell is sold outside of the US”.
Mr Smith explained that Intel favoured the US because of its talent, infrastructure and good access to worldwide markets. “The fourth [criterion] is cost — the US does really well on those first three,” he said, while US business policy puts Intel at a disadvantage to rivals in Taiwan, Korea and China.
Intel originally announced Fab 42 six years ago, when it said it would invest more than $5bn to build the Arizona facility. The chief executive at that time, Paul Otellini, announced the investment during a visit to one of the company’s Oregon factories by then-President Barack Obama. Intel’s new factories are often announced with heads of state, Mr Smith said, given the “enormous” and “transformative” investments.
Fab 42 had been slated for completion in 2013. Despite nods from Mr Obama in the 2013 State of the Union address, construction was put on hold in early 2014 as anticipated growth in the PC market failed to materialise.
In April, Intel said it would cut 12,000 jobs, about 11 per cent of its workforce, as it reconfigured its business to focus on the cloud and the internet of things as PC sales declined.
However, last month Intel reported stronger than expected sales in the fourth quarter of 2016, up 10 per cent, partly because of an improvement in the PC market. Gartner, a research group, forecast a 1 per cent drop in PC shipments this year, after a 6 per cent decline in 2016. Fab 42 will focus on making chips for data centres and connected devices.
“We’ve completed the transformation, the company is growing again, and our products continue to benefit in being ahead of the rest of the world in our manufacturing capability,” Mr Smith said. “We need capacity for growth — that’s what drives the need for us to start now on Fab 42.”
(Published by Financial Times - February 8, 2017)