Investors Shouldn't Worry About Intel's Fab 42 Factory

When you're the world's largest PC chip maker, the last thing people would expect you to do is stop work on building one of the most high-tech chip manufacturing facilities in the world. But that's exactly what Intel (NASDAQ: INTC  ) just did.

Fab 42 during construction in 2012. Source: Intel

The company's move to stop work on the finished but nonoperational Fab 42 facility is the temporary end of a $5 billion investment set into motion in 2011. The factory was going to be "the most advanced, high-volume semiconductor manufacturing facility in the world" according to Intel. While it's a bit disconcerting to see a brand-new building just sit there, Intel investors should see it as a cautious move by the company, rather than a step backward.

Waiting on the future
Intel told Reuters it won't open Fab 42 right now because of "capital utilization," a move likely induced by the slowdown in PC shipments in 2013. Both IDC and Gartner found that PC shipments fell 10% from 2012 to 2013, with Gartner saying the the drop was " the worst decline in PC market history." Next year PC shipments are expected to decline as well, although not as sharply and could even start bouncing back a bit.

With Intel's core business being PC chips, its not really a surprise the company postponed opening the fabrication factory. The company is taking a wait-and-see approach to PC demand before it ramps up production at the high-tech facility.

Planned expansion and new buildings always feel like the company is growing and doing well, so letting a brand-new building just sit there and not do what it was intended to do is disappointing. But Intel is upgrading other facilities so it can manufacture 14 nanometer chips.

Not opening Fab 42 is a cautious move by the company that allows it to still build the chips it needs to, while gauging future demand. Intel says it will use the building for future technologies, and I think that's exactly what it will do. Instead of spending money it doesn't need to, it can use Fab 42 for something it really needs later. Of course, it's not great that Intel started construction in the first place, but investors shouldn't look too much into the building sitting for a little longer.

Intel will report its latest quarterly numbers tomorrow and the company has already projected earnings to be flat. Not opening Fab 42 won't change any of that now. What investors should instead keep an eye on is how the company continues to pivot away from PC chips and into the mobile and wearable markets. Intel talked a lot about wearables at the recent Consumer Electronics Show, but the company is far behind competitors like Qualcomm, Samsung, and NVIDIA in the mobile space. Fab 42 could reemerge in a year or two as a key manufacturing facility for new chips in these competitive spaces, but for now it's not beneficial for investors to read too much into it.

Don't wait around for great stocks, get them now
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2796001, ~/Articles/ArticleHandler.aspx, 9/2/2015 4:53:34 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Chris Neiger

Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

Today's Market

updated 7 hours ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 4:00 PM
INTC $27.82 Down -0.72 -2.52%
Intel CAPS Rating: ****
NVDA $21.56 Down -0.92 -4.09%
Nvidia CAPS Rating: *****
QCOM $55.02 Down -1.56 -2.76%
Qualcomm CAPS Rating: ****
SSNLF $875.00 Down +0.00 +0.00%
Samsung CAPS Rating: ***