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Intel Walks the Talk

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You can't blame Intel (Nasdaq: INTC  ) for not putting its money where its mouth is.

The chip giant has committed to spending $5 billion on a down-home chip plant in Arizona, hot on the heels of CEO Paul Otellini landing a seat on President Obama's recently started Council on Jobs and Competitiveness.

I can't think of a better move to cement Otellini's place on that council than injecting billions of dollars into American construction, followed by about 4,000 permanent jobs at the site. Intel may sell most of its products overseas, but remains committed to a mostly American manufacturing base. Taiwan Semiconductor Manufacturing (NYSE: TSM  ) and United Microelectronics (NYSE: UMC  ) aren't likely to see outsourcing orders from Intel as long as Otellini runs the show.

Intel sees its top-notch manufacturing operations as a competitive advantage to hold rivals Advanced Micro Devices (NYSE: AMD  ) , NVIDIA (Nasdaq: NVDA  ) , and the legion of ARM Holdings (Nasdaq: ARMH  ) partners at bay. Making stuff may be cheaper in the Far East, but keeping its factories close to home gives Intel greater insight into and control over the process. It's not far-fetched to assume that this policy results in a tighter ship, which in this case would translate into higher manufacturing yields. That's an alternative road to lowering costs.

Otellini is only the second member of Obama's reformed job-creating committee, following the appointment of General Electric CEO Jeff Immelt in January. It remains to be seen whether Intel can leverage that high-profile appointment as another weapon in its arsenal, but I'd be shocked if Otellini didn't give it the old college try.

Few businesses have a stronger reputation for hardnosed business practices, after all, and some would even call the company heartless. The warm-and-fuzzy aura from Intel's large impact on the American market for high-tech jobs may ameliorate that impression but can't completely erase it.

Want to keep the chip leader honest? Add Intel to your watchlist.

Fool contributor Anders Bylund owns shares of AMD but holds no other position in any of the companies discussed here. Intel is a Motley Fool Inside Value pick. NVIDIA is a Motley Fool Stock Advisor selection. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended a diagonal call position on Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (6) | Recommend This Article (3)

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  • Report this Comment On February 22, 2011, at 7:18 PM, TEBuddy wrote:

    Thanks for waiving the Intel flag, and the heartwarming story, but why dont you report the facts of were all the previous layoffs and plant closures have been and where the rest of Intel's stuff is made across the globe. Some of their best work is done in Israel.

  • Report this Comment On February 22, 2011, at 7:57 PM, semiguru wrote:

    How about bringing back assembly and test back to the USA? With today's highly automated assembly plants, considering the cost of the off-shore manufacturing support infrastructure (communication, shipping, travel etc. etc.), the cost of onshore assembly and test could be competitive with some decent local, state and federal Business Tax Incentives.

  • Report this Comment On February 22, 2011, at 8:12 PM, JAVEROA wrote:

    You said it mate, some tax incentives and they will rush back home. Not only Intel but many others as well.

    If they have talents abroad, which I am sure they do, they can bring them over too.

    Spend billions on banks and then punish tech, that is what every government has been doing.

    For god sake, Intel is a monopoly with a forward P/E of 10. If that is not stupid, I do not know what is, especially when you look at the the OVER valuation of some companies out there.

  • Report this Comment On February 22, 2011, at 11:29 PM, BuyemHoldem wrote:

    Yes, Intel is a monopoly, bought & paid for at the expense of consumers, customers and competitors. And now a conspiracy with Obama to put a factory in John McCain's back yard.

  • Report this Comment On February 23, 2011, at 8:16 AM, rav55 wrote:

    Well, Intel is not a monopoly but I'm sure they'd like to be. And oh yes President Obama is most definitely trying to help out his old political buddy John McCain.

    What planet did you just arrive from?

  • Report this Comment On February 23, 2011, at 8:30 AM, joroi wrote:

    Walks the talk? Really Mr Bylund?

    Ok, so let's see. Mr. Otellini has, and rigihtfully so, pointed for years now that our tax code provides disincetives for investment here. He has also been an outspoken critic that our immigration policy prevents highly-skilled foreign-born students in our own universities from staying and working here due to the very low annual quotas. Finally, he has pointed again and again that our environmental policy greatly discourages investment in plants here and increases the construction/site development costs by more than 25% when compared to other countries.

    So, Mr. Bylund, tell me which of the above were actually improved by this administration? ... If you hear the crickets churping now that's because we have actually gone in the opposite direction on all of the above. Therefore, if Intel put their actions where their mouth was they will not build a single plant here until those plutocrats in DC got whacked over the head with the shovels of an angry mob....

    Ok, to end on a more optimistic note, here is my hope that Obama is only a single-term president, that the Jobs council's recommendations are sound and are heard and acted upon, and that the next administration actually does something to stop the flight of business overseas.

    Just my 2 cents.

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