SAN JOSE, Calif. - Spurred by tax incentives and a belief computer chip demand will continue to grow, Intel Corp. said Monday it will spend $3 billion to build a factory in Chandler and another $105 million to convert an inactive New Mexico plant into a temporary test facility.
The new factory - or "fab" - will create up to 1,000 new Intel jobs over the next several years, the company said. Another 3,000 people are expected to be hired during its construction at the company's site in Chandler. Intel currently employs 9,000 people in Arizona.
"This investment represents a significant commitment to our future as a company, the community within Arizona and to our nation," said Bob Baker, senior vice president and general manager of Intel's Technology and Manufacturing Group.
Construction will begin immediately. Once completed in the second half of 2007, the facility known as Fab 32 will become the Santa Clara company's sixth factory that produces chip wafers that are about 12 inches in diameter. The other operating factories are in Oregon, Ireland and New Mexico, with others currently under construction in Ireland and Arizona.
The company declined to comment on its other growth plans. Recently, officials in Israel and India have indicated the company plans to build factories or other facilities in their countries, but Intel has refused to confirm the news.
The new Arizona factory will be about 1 million square feet, including roughly 184,000 square feet of clean-room space. It will be used to build the microprocessor brains of personal computers as well as other chips.
"It's the modern-day equivalent of building the pyramids, but we have to build it in 18 to 24 months - and we have to be on budget," Baker said.
The Arizona Legislature this year enacted a tax relief measure intended to entice the new Intel plant and other major business investments in new or existing plants.
The measure, signed into law May 20 by Gov. Janet Napolitano, creates a new optional formula that businesses can use to reduce their state income taxes in Arizona. At Napolitano's insistence, the change takes effect only if companies commit at least $1 billion in capital investment projects.
Intel and major Arizona business groups lobbied for the change.
State Rep. Steve Huffman, a Tucson Republican who championed the tax measure in the Arizona Legislature, said the change was "absolutely critical" to Intel's selection of the Arizona site though not the only factor.
"When you make intelligent decisions to encourage business investment, it pays off every time," he said.
Baker also credited the legislative action.
"The decision to build Fab 32 in Arizona was not an easy one," he said. "The decision was made easier because of tax reform recently implemented in Arizona. It helped create a stable environment for this kind of investment."
Arizona tax officials estimated that the optional formula will cost the state $8 million in its first year and gradually increase to $150 million annually once fully implemented. Supporters said the analysis didn't include tax revenue from the creation of hundreds of high-paying jobs or other economic activity produced by projects enticed to the state by the change.
Intel also announced plans to convert an inactive fab in Rio Rancho, N.M., to a temporary component test facility for the next two years. It's expected to result in another 300 jobs to be added to the New Mexico site during that period.
Shares of Intel fell 23 cents to close at $26.52 Monday on the Nasdaq Stock Market.