Back to top

Analyst Blog

Despite investments worth $5 billion, Intel (INTC - Analyst Report) shelved the opening of its chip plant Fab 42 in Arizona, which was once cited by President Obama as an example of U.S. manufacturing potential.

This crucial decision came in the wake of a slump in demand for PC microprocessors, which happen to be the main source of revenues for Intel. As per research reports, global PC shipments fell by approximately 10% in 2013.

Intel is one of the world’s top chip manufacturers, but of late it has been hit hard by the slowdown in demand for PCs. Despite its endeavors to become a top supplier for smartphones and tablets, which have been gaining strength, Intel’s success in this regard has been limited.

Intel is not the only company to have suffered due to the PC shipment decline. PC makers including companies like Hewlett Packard (HPQ - Analyst Report), Dell Inc., IBM Corp. (IBM - Analyst Report) and Apple (AAPL - Analyst Report) have also experienced a sharp decline in revenues. As per reports, the main reason for the decline in PC sales is the relatively higher cost of PCs, which is leading customers to opt for smartphones and tablets.

In order to reduce the cost of production and thus increase profitability, Intel and some of its competitors like Samsung Electronics have decided to manufacture larger-sized wafers. Intel had planned to equip the Arizona fab with machinery needed to manufacture these large-sized wafers.

Reportedly, the majority of Intel’s existing plants are operating at less than 80% capacity, indicating that either demand remains below expectations or that Intel is gearing up for significant growth in the not-too-distant future. Since the company recently recruited more than a 1,000 employees at the site, it’s very likely that the second theory is correct.

Currently, Intel has a Zacks Rank # 3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%