Intel Expansion Plans Bode Well for California : Economy: Announcement that it will employ 1,750 at its Folsom facility is called the result of state’s improved business climate.
Signaling that California’s efforts to improve its business climate are paying off, semiconductor giant Intel Corp. said Wednesday that it will more than double the size of a previously announced expansion at its research and development center near Sacramento.
The boost means that a new $52.6-million building scheduled to open in early 1995 at the facility in Folsom will house 1,750 new employees, instead of the 750 initially planned. The 236-acre site already has 2,600 people in research and development, marketing and administration.
The decision, enhancing an expansion originally announced July 1, cheered California regulators and lawmakers who have watched as hundreds of thousands of high-paying jobs have evaporated or migrated from the state during the recession.
Gov. Pete Wilson said Intel’s expansion “sends a message around the world that California is back in business.” Business at Intel--the world’s largest maker of semiconductors, the chips of silicon that enable computers to think--has been booming of late, and growth in research and development jobs was inevitable, said Richard Hall, a company spokesman in Sacramento. It was simply a matter of where they would go.
In accelerating growth at Folsom, Intel noted that it was encouraged by recent legislation to end the tax on manufacturers who buy new equipment, make permanent a tax credit on research and development and change the formula for calculating the so-called unitary tax to favor companies that add jobs in California.
“The Legislature in September removed a large portion of (our) cost negatives, and it immediately made eminent sense to expand the Folsom facility even more rapidly,” Hall said. “California just became a more competitive, cost-effective location.”
With annual sales of nearly $9 billion, Intel has research facilities tied to manufacturing plants in Oregon, Arizona, Israel and Santa Clara, Calif., where it is based. Folsom is the only Intel facility without manufacturing. The company will spend about $965 million this year on research and development.
“That’s a pretty big absolute number,” said Millard Phelps, senior technology analyst at Hambrecht & Quist, a San Francisco investment firm. “Intel has always been driven by development and research.”
Last April, Intel disappointed California with a decision to locate a $1-billion, 1,500-job factory to make its newest and most powerful Pentium computer chips in Rio Rancho, N.M. The small town outside Albuquerque beat out several rivals, including Folsom, which had become a candidate late in the running.
At the time, Intel said the tax on manufacturing equipment would have added more than $70 million to the cost of a new plant in California.
In addition to the New Mexico plant, scheduled to open in 1995, the company is scouting a site for another $1-billion manufacturing facility. Hall said Folsom has only a slim chance of winning that plant because the company intends to put it at a site that already has manufacturing.
However, he said that “over the longer term, the next five to six years, there is the possibility of a plant for Folsom or Santa Clara.”
Wafer-fabrication plants, as chip-making facilities are known, create fewer full-time manufacturing jobs for the amount of investment than do R&D; facilities, Hall said. And R&D; workers get somewhat higher wages. However, “fab” plants create thousands more spinoff jobs for construction workers and suppliers.
The addition of 1,750 jobs is welcome news for the Sacramento area, where unemployment has ranged from 7.1% to 8.7% this year. In September, the rate was 7.7%, compared to 9.4% for California.
To help win the Folsom expansion, state, county and local governments kicked in $8.5 million in tax breaks and other incentives, mainly in the form of road improvements.
William Campbell, president of the California Manufacturers Assn., described Intel’s announcement as an indication that corporations, after years of harshly criticizing the business climate, are starting to recognize California’s efforts to become more competitive.
Intel shares, traded on Nasdaq, rose $2.50 to close at $63.50 on Wednesday.
