TI plans $3 billion chip plant in Texas

SAN FRANCISCO: Texas Instruments Inc. said it would build a $3 billion chip-making plant in Richardson, Texas, bucking a trend among semiconductor makers to shift production overseas.

The world's biggest maker of semiconductors for mobile telephones said groundbreaking for the new fabrication facility, or "fab", near its Dallas headquarters was expected by the end of 2005.

The facility will build some of the world's most advanced semiconductors on 300-millimeter, or 12-inch diameter, silicon wafers, TI said.

The plant will be the company's second facility with that capability and is expected to employ up to 1,000 people, TI said.

"TI spends almost $1 billion a year on capital and a significant portion will continue to stay in Texas with this planned expansion," said Tom Engibous, chairman, president and chief executive of TI.

The planned TI facility is the largest modern private-sector economic development project ever undertaken in Texas, Texas Governor Rick Perry said.

Analyst Jim Jungjohann of CIBC World Markets said the announcement of the project was a "small sign of optimism," coming "a quarter to two quarters ahead of what Wall Street expected" as the chipmaker prepares to recover from its industry's long-running slump.

However, Jungjohann said the project may not be viewed in a positive light by some in the near term.

"I would figure some investors are going to be a little put off by this knowing that their (capacity) utilization is below 80 percent," he said. "Some investors would rather see them use more foundry work from Taiwan and others."

TI, a rival of Intel Corp. and Motorola Inc. , earlier this month warned its current quarter sales and earnings would be lower than expected after the outbreak of SARS, Severe Acute Respiratory Syndrome, hurt chip sales in Asia.

Shares in TI closed on Monday down 41 cents, or 2.3 percent, at $17.60 on the New York Stock Exchange.

© Reuters