Intel’s fortunes are on the up. Or at least, its latest investment in Ireland would indicate so.
A year ago, Intel was staring down the barrel of yet another round of job cuts as newly appointed chief executive Lip-Bu Tan tried to right a listing ship. He told staff that the company would build what its customers needed, when they needed it. Projects were paused, Intel’s planned Magdeburg plant in Germany – which had previously represented a sore loss for Ireland – was cancelled.
After failing to capitalise on the mobile revolution, Intel was widely considered to have missed out yet again with artificial intelligence (AI). It seemed as though Ireland’s days of winning billions of dollars in investment from the tech giant were gone for the foreseeable future.
But technology moves fast. From a death spiral, Intel transformed itself into the comeback king. It has since bought back the 49 per cent stake in the Leixlip plant that it sold to private equity group Apollo, albeit for a few million dollars extra. And now it has begun a €5 billion investment programme into its Leixlip, Co Kildare, campus that will boost manufacturing capabilities here and create hundreds of high-tech jobs.
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Intel hasn’t said how many exactly. Its chief technology and operations officer and general manager for Intel Foundry, Naga Chandrasekaran, said the number would evolve over time.
[ Intel’s remarkable comeback means for Ireland Inc, and for LeixlipOpens in new window ]
Regardless, it is a significant investment for the company, representing almost 30 per cent of its total capital expenditure budget for the year. It is also the third largest investment in this particular space in the past three years. By any metric, that is a big announcement for Intel and an even bigger one for its operations in Ireland.
Behind it all is, apparently, the rising demand for AI. While Intel may have missed out on the demand boost from training AI models, it says that the implementation of the technology and the accompanying demand for chips such as Intel’s Xeon 6 will be the driving force for its business in the coming years.
The fears that the US government and its stake in the company would affect investments seem to have been assuaged. Chandrasekaran said the US government investment was a show of confidence in the company, but said it had largely left the governance of Intel to its executives.
“The government hasn’t really been involved in our day-to-day operations, or our investments, or our products and what we do with it,” he said.
“I think the US government realises that Intel is a global company, and we will have to continue to invest both in our US resources as well as other areas. With Europe being a strong partner with the US I think this is seen as a positive investment.”
The money has already begun to flow. Intel began investing in Leixlip in the early part of the year. While little will change on the outside, the plans are to move more high-end equipment into the facility. Eventually, it plans to link its factories at Leixlip to create a high-velocity manufacturing operation.
But there are potential headwinds. The high cost of electricity here and the increased construction costs are two things that have been highlighted by Intel. The spectre of an AI bubble, meanwhile, still looms over the whole industry.
Billions of dollars have been poured into AI. Valuations have strained the upper limits of credulity. And what happens if the bubble bursts and if one of the big tech companies falters?
For Intel, discipline is key. “I’m always worried. My view on this is that the AI story is strong and it is there to stay. Is there a possibility that there is a blip, some correction? It is possible. But the fundamentals are strong in my opinion,” Chandrasekaran said.
“The demand for AI-based applications and AI-based growth is going to be there over the longer term. That’s why we want to be careful with our investments.”
For the moment, at least, AI seems to be a driving force for good in the Irish market, reversing a recent trend of job cuts by Big Tech firms here. But as Intel’s Chandrasekaran notes, “the future is like a crystal ball. So who knows?”.
