Intel's $7B Plan Reveals 8% Spending Cut

Intel's $7 billion two-year U.S. manufacturing upgrade plan is really an 8% spending cut.
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Intel's

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$7 billion two-year U.S. manufacturing upgrade plan is really an 8% spending cut.

In a bid to pump up enthusiasm for U.S. technology investing amid a gloomy economic climate, Intel chief Paul Otellini

announced the plan

Tuesday at the Economic Club of Washington, D.C.

"We're investing in America to keep Intel and our nation at the forefront of innovation," Otellini said.

While billed as a major infusion of cash stateside, the move is merely a green light to a long-anticipated shift to 32-nanometer technology meant to help Intel catch up with other 32-nanometer advances by outfits like

IBM

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and its partners.

The plan involves no new jobs or new production facilities but merely the funding of 7,000 existing jobs at three existing plants.

Intel's total spending on facility improvements and other capital expenses has been about $5 billion a year for the past two years, or $10 billion in total. Intel said in a press release that it allocates 75% of its capital budget to the U.S., equating to about $7.5 billion of the overall spending.

As a result, assuming Intel continues to dedicate three-quarters of its capital spending to the U.S. in the upcoming two years, that would imply total expenditures of about $9.33 billion, or around 8% below the level of the prior two years.

A company representative said Intel does "not have a two-year plan at this point."

It's no surprise that Intel is slashing expenses. Last month the

company announced

it was closing facilities in Penang, Malaysia and one in Cavite, Philippines and halting wafer production in its Hillsboro, Ore. and Santa Clara, Calif.

Sitting on a

mountain of inventory

amid a severe PC sales slump, Intel needs to spark a new buying cycle, and is betting $7 billion on a new 32-nanometer chip to power an array of computer and mobile devices.

Intel's decision to wave the flag over its necessary upgrade plan probably amounts to less of a windfall for U.S. manufacturing than presented. On the other hand, with tech in the throes of a massive recession, any spending can be cast as somewhat heroic.