A number of industry reports that emerged on Tuesday suggests that Intel Corp. intends to slowdown aggressive expansion of manufacturing capacities by upgrading fabs next year due to slower than expected growth of demand towards various chips. In particular, there are indicators that Intel may reduce capital expenditures in 2012 and/or 2013.

Earlier this year the world's largest maker of chips announced aggressive plan to transit five of its fabs to 22nm process technology in 2011 - 2012 timeframe. In particular, the company is looking forward to upgrade its D1D (Oregon), D1C (Oregon), Fab 13 (Arizona), Fab 32 (Arizona) and Fab 28 (Israel) production facilities to the new manufacturing process. Some financial analysts believed that Intel also intended to convert its Fab 24 in Leixlip, Irelan, to the new process technology in 2012 - 2013 timeframe. However, Intel seems to have delayed the plan and will only convert the fab to 10nm or 14nm fabrication processes.

"Our industry checks suggest Intel has decided to remove Fab 24 (Ireland) from its 1270 (22nm) roadmap. What is unclear to us is whether Intel will re-allocate capacity to Israel or other facilities or whether this is a cut to capex," analyst C.J. Muse with Barclays Capital wrote in a research note, reports Tech Trader Daily.

Although the plans to upgrade the Fab 24 to 22nm have never been made public, it is logical for Intel to improve the 300mm factory that makes chips using 90nm and 65nm process technologies.

"Our checks indicate that INTC has changed its plan on its Fab 24 in Ireland, putting on hold the upgrade of the fab from 90/65nm to 22nm. It plans to revisit the future of Fab 24 at 14nm or 10nm node. Contrary to what was stated by at least one competitor, there are no pushouts of already ordered tools associated with this decision. In other words, it doesn’t impact current orders/shipments but rather, the impact relates more to what INTC will spend in 2012," wrote Timothy Arcuri from Citigroup.

Although reduction of spending by Intel means lower sales of semiconductor production equipment in 2012, it does not mean that Intel is likely to run into any capacity-related problems with 22nm thanks to five fabs (a record number of leading-edge fabs for Intel) and slowing demand. In generally, changes of upgrade plans of one fab mean that Intel will have to reconsider its future strategy a bit.

Given the fact that Intel has been posting excellent financial results recently, the change of the intentions came due to potential lack of incentives from the government of Ireland.

Intel did not comment on the story.

Tags: Intel, Semiconductor, 22nm, 300mm