Intel postpones Leixlip expansion to save €219m

Intel's move to postpone expansion at Leixlip, Co Kildare, is understood to be aimed at saving $200 million (€219 million) this year.

In the latest sign that slower growth in the US could have a serious impact in the Republic, the chip-maker yesterday said production at its Fab 24 plant would not begin until mid-2003, about nine months later than the target it cited last December.

Intel and IDA Ireland, which moved to play down the development, both claimed this postponement was revealed by the company in early February. But both accepted the company issued no press release at that time.

Yesterday's move means about 1,400 construction workers will lose their jobs at Leixlip in the next two months, with most leaving the site by Easter. Intel's spokesman said he did not know how many of those workers would be laid off by its sub-contractors. He accepted layoffs were inevitable but suggested some construction workers would be re-deployed by their employers.

The company said 50-100 would remain on the project, which it planned to accelerate again in 2002. "We have taken the opportunity to do this as we are well ahead of the construction schedule," said the company in a statement.

Its spokesman denied a suggestion that the company could be perceived as rewarding early completion of elements of the project with postponement of its next phase.

"We're not trying to be arrogant but we have to be realistic," he said. "Many companies have taken far more drastic actions. We are clearly under pressure and, if it's not absolutely necessary to make that expenditure this year, we won't."

The development is understood to reduce Intel's expenditure on the project this year to $50 million from $250 million. An IDA Ireland spokesman claimed Intel's decision was the "logical conclusion" of renewed pressure on its business.

In its latest profit warning last Friday, Intel said revenues in the first quarter of the year would be 25 per cent weaker than in the final three months of 2000. The company also signalled it wanted to cut 5,000 jobs from its 85,000 staff worldwide.

Its spokesman said this would have a "minor" impact at Leixlip, where Intel employs 3,500 and its sub-contractors employ 1,400. While overall employment patterns would not change, a "modest reduction" would be achieved by not replacing staff who leave the company.

The turnover of staff in 2000 was 10 per cent, although Intel claims the figure could fall to 46 per cent this year. That suggests 210 positions might not be replaced.

The project management company leading the Fab 24 project, Jacob's Engineering, declined to comment. The principal contractors on the site include PJ Hegarty, Mercury Engineers, Afcon and HA O'Neill.

Intel insisted it was "fully committed" to the new project, which will employ 1,000 more people.

A spokesman for the Tanaiste, Ms Harney, said she was in close contact with Intel on the project. She was satisfied Intel remained committed to the development of the new plant and to its recruitment target.

The Fab 24 project was seen as a flagship development by IDA Ireland when it was sanctioned last June.

Then worth $1.5 billion and scheduled to begin operations this year, its completion target was postponed until the second half of 2002 last December. Intel's decision at that time to produce chips with 300mm silicon wafers instead of 200mm wafers increased the cost of its expansion to $2 billion, a move welcomed by IDA Ireland. Intel said yesterday that it had again upgraded the wafers, increasing its overall investment in the project to $2.2-$2.3 billion.

Instead of using a process known as 0.13 micron in the chips, it would use 0.10. The new product would function twice as quickly as its current Pentium 4 chip, the spokesman claimed.