Intel warns of further falling sales

"It's a gigantic number," he said. "It's not like their fabs are full now."

About $2 billion of the increase in spending this year will go to building a research facility for a forthcoming type of plant that processes 450-millimeter silicon wafers. When that goes into production, it will help increase the number of chips the company can get from each production run.

Under Mr Otellini, Intel has been able to compensate for part of the PC malaise by catering to buyers of servers, which outfit data centres. Revenue in Intel's data centre group rose 4 per cent to $2.8 billion in the recent period, compared with a 6 per cent decline in its main PC-chip business.

Intel expects demand from companies to drive a return to low-double-digit percentage growth for the data-centre business, chief financial officer Stacy Smith said.

Intel has "modest" expectations for growth in the PC industry, and is betting new chips going into tablets and slimline laptops it calls Ultrabooks will catch the attention of consumers. That will translate into reinvigorated demand in the second half of the year, Mr Smith said in an interview.

"We expect some unit growth in the back half of the year and into 2014," he said. "We're putting in the factory capacity to support that."

While Intel has won some orders from phone makers for its chips, that business won't "move the needle" for the whole company until next year, when its customers bring handsets featuring so-called long-term evolution high-speed data links to market, Mr Smith said.

PC shipments fell 4 per cent in 2012 and will slide a further 1.5 per cent this year, JPMorgan analysts estimate. Tablet unit sales, by contrast, rose 72 per cent last year and will surge 54 per cent this year, they project.

Fourth-quarter gross margin, the percentage of sales left after subtracting production costs, was 58 per cent, compared with an average analyst estimate of 57 per cent. A year earlier, gross margin was 65 per cent.

Intel's results kick off two weeks of earnings reports from the largest US technology companies. Because its chips power the majority of the world's PCs, investors watch Intel's earnings for a broad indication of demand for desktop, server and laptop computers.

The company's biggest customers are PC makers Hewlett- Packard and Dell, which together contribute more than 30 per cent of revenue, according to a Bloomberg supply-chain analysis.

Bloomberg