Intel puts Arizona chip factory construction on back burner

After pledging to invest $5 billion on the construction of its Fab 42 high-tech manufacturing plant, the chip maker puts the project on hold.

Intel's Fab 32 chip factory in Chandler, Ariz., opened in 2007.

(Credit: Intel)

Construction on one of Intel's most heralded factories is being put on hold indefinitely. The company's "Fab 42" manufacturing plant in Chandler, Ariz., which was slated to make high-tech microchips, will not be opening up for shop anytime soon, according to Reuters.

"The new construction is going to be left vacant for now and it will be targeted at future technologies," Intel spokesman Chuck Mulloy told Reuters.

Intel began construction on Fab 42 in 2011. The plant was expected to produce Intel's next generation of processors built on its 14-nanometer technology. At the start of construction, the company said it was investing more than $5 billion in the facility.

President Obama visited the plant in January 2012 and commended Intel for creating US jobs. He also mentioned Fab 42 in his State of the Union address last year saying, "After locating plants in other countries like China, Intel is opening its most advanced plant right here at home."

While Intel is halting construction for the time being on Fab 42, it's upgrading other factories at the same site, according to Reuters. The company said it's converting the 22-nanometer manufacturing equipment in its older plants to also make 14-nanometer chips.

"It boils down to better capital utilization," Mulloy told Reuters.

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Mulloy also said the company has surpassed its goal of hiring more than 1,000 employees since beginning construction on Fab 42.

A sluggish PC market may be one of the causes of Intel's slowdown. A report from last April said the company wasn't churning out chips at the usual rate and that factory utilization was down around 60 percent. Analysts said this was because PC shipments had been lower than expected.

As tablets and smartphones continue to replace PCs, the market doesn't appear to be getting any better. A report from Gartner last week showed that 2013's worldwide PC shipments, including desktops and laptops, were down 10 percent from 2012.

CNET contacted Intel for comment. We'll update the story when we get more information.