Intel Corp. has decided it will delay the opening of its computer chip plant near Alliance Airport north of here by a year, to late 2000.
Intel decided to delay the Fort Worth plant, and the initial hiring of at least 1,000 workers, after making a product switch at its newest plant in Israel. The Israel plant was to make “flash” memory chips, which are used in high-end computers, digital cameras and cellular telephones.
But demand for those chips has weakened in recent months, as computer makers focus on less expensive models. So the plant in Israel will now make logic memory chips, which is what Fort Worth had been scheduled to make.
The logic chips power the operating systems of most personal computers.
Intel executives said their commitment to the Fort Worth plant, as well as related educational programs, has not wavered. They said construction of the $1.3 billion plant, on 530 acres in Denton County next to the airport, will proceed on schedule.
They also said Fort Worth is likely to be assigned the production of the latest and smallest versions of its microprocessor chips.
“Intel’s commitment to Fort Worth continues to be strong,” said Terry McDermott, an Intel spokesman in Fort Worth. “By getting the later technology, Fort Worth’s long-term future will be brighter.”
The Fort Worth City Council has approved property tax abatements for Intel.
Plant Manager Steve Grant assured officials of the Northwest school district that the change will not affect tax revenues expected from the plant.
Intel, which is based in Santa Clara, Calif., has already broken ground for the plant. Intel has said that, depending on the state of the business, the plant could eventually employ up to 8,000 workers.
Technicians will be hired at base salaries beginning at $28,000 a year, with bonuses added.
The Fort Worth plant would be Intel’s eighth fabricating plant in the United States. Intel had planned to begin production in Fort Worth in the third quarter of 1999.
Howard High, an Intel spokesman in California, said the decision to delay the opening was based on weakening in the market for the flash chips.
Flash memory chips can store information even when the power is turned off. They are used as permanent storage devices in digital cameras, cellular phones and some personal computers.
Logic chips hold the software that goes into most personal computers; they go through the familiar loading process every time the computer is turned on.
Analysts had expected the flash chips to be Intel’s next big product. But profits had weakened, High said, because of slack demand and increased competition.
He said some rival chipmakers have decided to go after the flash chip sector, rather than challenge Intel’s dominance in logic chips, where Intel has 85 percent of the market, largely because of its Pentium chip.
In turn, the plant scheduled to go into flash memory production in Israel has been converted to logic chips.
“The need for the Fort Worth plant therefore was pushed back,” High said.
Intel also determined that the Fort Worth plant will probably make the next-generation chip, with a circuit line of 125,000th of an inch. The current size is 100,000th of an inch.
“With chips, all great things start when you make them smaller,” High said. “So we have determined that we can assign the newer generation, smaller chips, to the Fort Worth plant.”
Intel and the rest of the semiconductor industry has been roiled recently by lower-than-expected earnings and worries about a shakeout.
“The demand for home PCs is slowing,” said Eliot Glazer, an analyst for Du Pasquier & Co. in New York, “and the growth area is toward the lower end of the market.”
Glazer said that represents a problem for Intel and other chipmakers because the cheaper computers use less powerful, and thus less expensive and lower margin, chips that the higher-end PCs costing $2,000 and up.
Patrick Dunkerly, an analyst with Securities Corp. of Iowa in Cedar Rapids, said Intel’s dominant position in the chip market is under new pressure.
“The company is feeling more competition than ever from rivals such as Advanced Micro Devices and Cyrix,” Dunkerley said. (Cyrix, which is based in Richardson, announced a deal in July to be acquired by National Semiconductor.)
But he added: “The chip market is still strong and the demand is still there. We’ll continue to see good unit growth. The question is which segments of the market will grow fastest.”
