Intel to Invest $1 Billion in Asia for Plants, Equipment

From Bloomberg News

The world's largest computer chip maker, Intel Corp. on Monday said it will invest $1 billion in plants and equipment in Asia and buy $1 billion of products from South Korea this year.

The investments reflect Intel's belief that Asia will remain one of the fastest-growing markets for personal computers. The company sees "major growth in PC usage," in Asia, Intel President and Chief Operating Officer Craig Barrett said in Seoul during a trip through the region.

Intel shares fell $1.50 to close at $77.38 on Nasdaq. Shares of Palo Alto-based Hewlett-Packard Co. rose 31 cents to close at $63.13 on the New York Stock Exchange.

Barrett's comments follow Hewlett-Packard's disclosure Saturday that it will invest $300 million in South Korea. Although Asian companies have curtailed capital spending, especially in South Korea, U.S. technology companies see Asia as a key market for long-term profit growth. Falling Asian currencies also make it cheaper for U.S. companies to invest there.

"This is a vote of confidence in the Asian economies because companies like Intel and HP are not significantly curtailing their investments in Asia," said analyst Daniel Scovel at Fahnestock & Co. "Fundamentally nothing has changed about why companies went to those markets in the first place," he said.

For example, PC shipments to China rose 40% last year to 2 million, Scovel said. Although that's a small chunk of the 80 million units shipped last year, it's the fastest-growing market.

The $1 billion Intel said it will invest in Asia is 19% of the $5.3 billion it expects to pay this year in capital spending worldwide.

Santa Clara-based Intel also plans to buy $1 billion of chips and other products and services from South Korean companies this year, a move that may help hold down costs.

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