INTC » Topics » Manufacturing and Assembly and Test

These excerpts taken from the INTC 10-K filed Feb 23, 2009.
Manufacturing and Assembly and Test
 
As of December 27, 2008, 70% of our wafer fabrication, including microprocessors and chipsets, was conducted within the U.S. at our facilities in Arizona, Oregon, Massachusetts, New Mexico, and California. The remaining 30% of our wafer fabrication was conducted outside the U.S. at our facilities in Ireland and Israel.
 
As of December 27, 2008, we primarily manufactured our products in wafer fabrication facilities at the following locations:
 
                 
Products   Wafer Size     Process Technology   Locations
Microprocessors
    300mm     45nm   Arizona, New Mexico, Israel
Chipsets and microprocessors
    300mm     65nm   Ireland, Arizona, Oregon
Chipsets, microprocessors, and other products
    300mm     90nm   Ireland
Chipsets
    200mm     130nm   Oregon, Massachusetts, Arizona, California
NOR flash memory
    200mm     65nm–130nm   Ireland
Chipsets
    200mm     180nm and above   Ireland
 
We expect to increase the capacity of certain facilities listed above through additional investments in capital equipment. In addition to our current facilities, we are building a 300mm wafer fabrication facility in China. Subsequent to the end of 2008, management approved plans to restructure some of our manufacturing and assembly and test operations, and align our manufacturing and assembly and test capacity to current market conditions. These actions, which are expected to take place beginning in 2009, include stopping production at a 200mm wafer fabrication facility in Oregon and ending production at our 200mm wafer fabrication facility in California.
 
As of December 27, 2008, the substantial majority of our microprocessors were manufactured on 300mm wafers using our 45nm process technology. In the second half of 2009, we expect to begin manufacturing microprocessors using our 32nm process technology. As we move to each succeeding generation of manufacturing process technology, we incur significant start-up costs to prepare each factory for manufacturing. However, continuing to advance our process technology provides benefits that we believe justify these costs. The benefits of moving to each succeeding generation of manufacturing process technology can include using less space per transistor, reducing heat output from each transistor, and/or increasing the number of integrated features on each chip. These advancements can result in microprocessors that are higher performing, consume less power, and/or cost less to manufacture.
 
To augment capacity, we use third-party manufacturing companies (foundries) to manufacture wafers for certain components, including networking and communications products. In addition, we primarily use subcontractors to manufacture board-level products and systems, and purchase certain communications networking products from external vendors, principally in the Asia-Pacific region.
 
Our NAND flash memory products are manufactured by IMFT, a NAND flash memory manufacturing company that we formed with Micron Technology, Inc. We currently purchase 49% of the manufactured output of IMFT. Assembly and test of NAND flash memory products is performed by Micron and other external subcontractors. See “Note 6: Equity Method and Cost Method Investments” in Part II, Item 8 of this Form 10-K.
 
During the second quarter of 2008, we completed the divestiture of our NOR flash memory business in exchange for an ownership interest in Numonyx B.V. We entered into supply and services agreements that involved the manufacture and the assembly and test of NOR flash memory products for Numonyx through 2008. In the fourth quarter of 2008, we agreed with Numonyx to extend certain supply and service agreements through the end of 2009. In addition, we are leasing a wafer fabrication facility located in Israel to Numonyx. That facility is not shown in our above listing of wafer fabrication facilities. See “Note 6: Equity Method and Cost Method Investments” in Part II, Item 8 of this Form 10-K.
 
Following the manufacturing process, the majority of our components are subject to assembly and test. We perform our components assembly and test at facilities in Malaysia, China, Costa Rica, and the Philippines. We are building a new assembly and test facility in Vietnam that is expected to begin production in 2010. To augment capacity, we use subcontractors to perform assembly of certain products, primarily chipsets and networking and communications products. The restructuring plans described above include closing two assembly and test facilities in Malaysia, one facility in the Philippines, and one facility in China, and are expected to take place beginning in 2009.


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Table of Contents

Our employment practices are consistent with, and we expect our suppliers and subcontractors to abide by, local country law. In addition, we impose a minimum employee age requirement as well as progressive environmental, health, and safety (EHS) requirements, regardless of local law.
 
We have thousands of suppliers, including subcontractors, providing our various materials and service needs. We set expectations for supplier performance and reinforce those expectations with periodic assessments. We communicate those expectations to our suppliers regularly and work with them to implement improvements when necessary. We seek, where possible, to have several sources of supply for all of these materials and resources, but we may rely on a single or limited number of suppliers, or upon suppliers in a single country. In those cases, we develop and implement plans and actions to reduce the exposure that would result from a disruption in supply. We have entered into long-term contracts with certain suppliers to ensure a portion of our silicon supply.
 
Our products typically are produced at multiple Intel facilities at various sites around the world, or by subcontractors who have multiple facilities. However, some products are produced in only one Intel or subcontractor facility, and we seek to implement actions and plans to reduce the exposure that would result from a disruption at any such facility. See “Risk Factors” in Part I, Item 1A of this Form 10-K.
 
Manufacturing
and Assembly and Test



 



As of December 27, 2008, 70% of
our wafer fabrication, including microprocessors and chipsets,
was conducted within the U.S. at our facilities in Arizona,
Oregon, Massachusetts, New Mexico, and California. The remaining
30% of our wafer fabrication was conducted outside the U.S. at
our facilities in Ireland and Israel.



 



As of December 27, 2008, we
primarily manufactured our products in wafer fabrication
facilities at the following locations:



 




























































































                 

Products

 

Wafer Size

 

 

Process Technology

 

Locations


Microprocessors


 

 

300mm

 

 

45nm

 

Arizona, New Mexico, Israel


Chipsets and microprocessors


 

 

300mm

 

 

65nm

 

Ireland, Arizona, Oregon


Chipsets, microprocessors, and other products


 

 

300mm

 

 

90nm

 

Ireland


Chipsets


 

 

200mm

 

 

130nm

 

Oregon, Massachusetts, Arizona, California


NOR flash memory


 

 

200mm

 

 

65nm–130nm

 

Ireland


Chipsets


 

 

200mm

 

 

180nm and above

 

Ireland







 



We expect to increase the capacity
of certain facilities listed above through additional
investments in capital equipment. In addition to our current
facilities, we are building a 300mm wafer fabrication facility
in China. Subsequent to the end of 2008, management approved
plans to restructure some of our manufacturing and assembly and
test operations, and align our manufacturing and assembly and
test capacity to current market conditions. These actions, which
are expected to take place beginning in 2009, include stopping
production at a 200mm wafer fabrication facility in Oregon and
ending production at our 200mm wafer fabrication facility in
California.



 



As of December 27, 2008, the
substantial majority of our microprocessors were manufactured on
300mm wafers using our 45nm process technology. In the second
half of 2009, we expect to begin manufacturing microprocessors
using our 32nm process technology. As we move to each succeeding
generation of manufacturing process technology, we incur
significant
start-up
costs to prepare each factory for manufacturing. However,
continuing to advance our process technology provides benefits
that we believe justify these costs. The benefits of moving to
each succeeding generation of manufacturing process technology
can include using less space per transistor, reducing heat
output from each transistor,
and/or
increasing the number of integrated features on each chip. These
advancements can result in microprocessors that are higher
performing, consume less power,
and/or cost
less to manufacture.



 



To augment capacity, we use
third-party manufacturing companies (foundries) to manufacture
wafers for certain components, including networking and
communications products. In addition, we primarily use
subcontractors to manufacture board-level products and systems,
and purchase certain communications networking products from
external vendors, principally in the Asia-Pacific region.



 



Our NAND flash memory products are
manufactured by IMFT, a NAND flash memory manufacturing company
that we formed with Micron Technology, Inc. We currently
purchase 49% of the manufactured output of IMFT. Assembly and
test of NAND flash memory products is performed by Micron and
other external subcontractors. See “Note 6: Equity Method
and Cost Method Investments” in Part II, Item 8 of this
Form 10-K.



 



During the second quarter of 2008,
we completed the divestiture of our NOR flash memory business in
exchange for an ownership interest in Numonyx B.V. We entered
into supply and services agreements that involved the
manufacture and the assembly and test of NOR flash memory
products for Numonyx through 2008. In the fourth quarter of
2008, we agreed with Numonyx to extend certain supply and
service agreements through the end of 2009. In addition, we are
leasing a wafer fabrication facility located in Israel to
Numonyx. That facility is not shown in our above listing of
wafer fabrication facilities. See “Note 6: Equity Method
and Cost Method Investments” in Part II, Item 8 of this
Form 10-K.



 



Following the manufacturing
process, the majority of our components are subject to assembly
and test. We perform our components assembly and test at
facilities in Malaysia, China, Costa Rica, and the Philippines.
We are building a new assembly and test facility in Vietnam that
is expected to begin production in 2010. To augment capacity, we
use subcontractors to perform assembly of certain products,
primarily chipsets and networking and communications products.
The restructuring plans described above include closing two
assembly and test facilities in Malaysia, one facility in the
Philippines, and one facility in China, and are expected to take
place beginning in 2009.






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Table of Contents






Our employment practices are
consistent with, and we expect our suppliers and subcontractors
to abide by, local country law. In addition, we impose a minimum
employee age requirement as well as progressive environmental,
health, and safety (EHS) requirements, regardless of local law.



 



We have thousands of suppliers,
including subcontractors, providing our various materials and
service needs. We set expectations for supplier performance and
reinforce those expectations with periodic assessments. We
communicate those expectations to our suppliers regularly and
work with them to implement improvements when necessary. We
seek, where possible, to have several sources of supply for all
of these materials and resources, but we may rely on a single or
limited number of suppliers, or upon suppliers in a single
country. In those cases, we develop and implement plans and
actions to reduce the exposure that would result from a
disruption in supply. We have entered into long-term contracts
with certain suppliers to ensure a portion of our silicon supply.



 



Our products typically are
produced at multiple Intel facilities at various sites around
the world, or by subcontractors who have multiple facilities.
However, some products are produced in only one Intel or
subcontractor facility, and we seek to implement actions and
plans to reduce the exposure that would result from a disruption
at any such facility. See “Risk Factors” in Part I,
Item 1A of this Form
10-K.



 




These excerpts taken from the INTC 10-K filed Feb 20, 2008.
Manufacturing and Assembly and Test
 
As of December 29, 2007, 73% of our wafer fabrication, including microprocessor, chipset, NOR flash memory, communications, and other silicon fabrication, was conducted within the U.S. at our facilities in Arizona, New Mexico, Oregon, Massachusetts, and California. The remaining 27% of our wafer fabrication was conducted outside the U.S. at our facilities in Ireland and Israel.
 
As of December 29, 2007, we primarily manufactured our products in wafer fabrication facilities at the following locations:
 
                 
Products   Wafer Size     Process Technology   Locations
 
Microprocessors
    300mm     45nm   Oregon, Arizona
Microprocessors and chipsets
    300mm     65nm   Arizona, Ireland, Oregon
Chipsets and other products
    300mm     90nm   New Mexico, Ireland
NOR flash memory
    200mm     65nm–130nm   Israel, Ireland, California
Chipsets and other products
    200mm     130nm and above   Oregon, Massachusetts, Arizona, Ireland
 
We expect to increase the capacity of certain facilities listed above through additional investments in capital equipment. In addition to our current facilities, we are building a facility in Israel that is expected to begin wafer fabrication for microprocessors on 300mm wafers using 45nm process technology in the second half of 2008. Also, we are building a 300mm wafer fabrication facility in China that is expected to begin production in 2010.
 
As of December 29, 2007, the majority of our microprocessors were manufactured on 300mm wafers using our 65nm process technology. In 2007, we started manufacturing microprocessors using our new 45nm process technology, which enables higher and more energy-efficient processor performance. The benefits of moving to each succeeding generation of manufacturing process technology can include using less space per transistor, reducing heat output from each transistor, and/or increasing the number of integrated features on each chip. These advancements can result in microprocessors that are higher performing, consume less power, and/or cost less to manufacture.
 
To augment capacity, we use third-party manufacturing companies (foundries) to manufacture wafers for certain components, including chipset, networking, and communications products. In addition, we primarily use subcontractors to manufacture board-level products and systems, and purchase certain communications networking products from external vendors, principally in the Asia-Pacific region.
 
Our NAND flash memory products are manufactured by IMFT, a NAND flash memory manufacturing company that we formed with Micron Technology, Inc. in 2006. We currently purchase 49% of the manufactured output of IMFT. See “Note 19: Ventures” in Part II, Item 8 of this Form 10-K.
 
Following the manufacturing process, the majority of our components are subject to assembly and test. We perform our components assembly and test at facilities in Malaysia, China, the Philippines, and Costa Rica. We plan to continue investing in new assembly and test technologies as well as increasing the capacity of our existing facilities and building new facilities to keep pace with our microprocessor, chipset, and communications technology improvements. In line with these plans, we are building a new assembly and test facility in Vietnam, which is expected to begin production in 2009. This facility will have greater square footage than each of our current facilities, which will enable us to take advantage of greater economies of scale. To augment capacity, we use subcontractors to perform assembly of certain products, primarily flash memory, chipsets, and networking and communications products. Assembly and test of NAND flash memory products, manufactured by IMFT, is performed by Micron and other external subcontractors.
 
Our employment practices are consistent with, and we expect our suppliers and subcontractors to abide by, local country law. In addition, we impose a minimum employee age requirement as well as progressive environmental, health, and safety requirements regardless of local law.
 
We have thousands of suppliers, including subcontractors, providing our various materials and service needs. We set expectations for supplier performance and reinforce those expectations with periodic assessments. We communicate those expectations to our suppliers regularly and work with them to implement improvements when necessary. We seek, where possible, to have several sources of supply for all of these materials and resources, but we may rely on a single or limited number of suppliers, or upon suppliers in a single country. In those cases, we develop and implement plans and actions to reduce the exposure that would result from a disruption in supply. We have entered into long-term contracts with certain suppliers to ensure a portion of our silicon supply.


7


Table of Contents

Our products typically are produced at multiple Intel facilities at various sites around the world, or by subcontractors who have multiple facilities. However, some products are produced in only one Intel or subcontractor facility, and we seek to implement actions and plans to reduce the exposure that would result from a disruption at any such facility. See “Risk Factors” in Part I, Item 1A of this Form 10-K.
 
Manufacturing
and Assembly and Test



 



As of December 29, 2007, 73% of our wafer fabrication,
including microprocessor, chipset, NOR flash memory,
communications, and other silicon fabrication, was conducted
within the U.S. at our facilities in Arizona, New Mexico,
Oregon, Massachusetts, and California. The remaining 27% of our
wafer fabrication was conducted outside the U.S. at our
facilities in Ireland and Israel.


 



As of December 29, 2007, we primarily manufactured our
products in wafer fabrication facilities at the following
locations:


 




















































































                 

Products

 

Wafer Size

 

 

Process Technology

 

Locations
 


Microprocessors


 

 

300mm

 

 

45nm

 

Oregon, Arizona


Microprocessors and chipsets


 

 

300mm

 

 

65nm

 

Arizona, Ireland, Oregon


Chipsets and other products


 

 

300mm

 

 

90nm

 

New Mexico, Ireland


NOR flash memory


 

 

200mm

 

 

65nm–130nm

 

Israel, Ireland, California


Chipsets and other products


 

 

200mm

 

 

130nm and above

 

Oregon, Massachusetts, Arizona, Ireland







 



We expect to increase the capacity of certain facilities listed
above through additional investments in capital equipment. In
addition to our current facilities, we are building a facility
in Israel that is expected to begin wafer fabrication for
microprocessors on 300mm wafers using 45nm process technology in
the second half of 2008. Also, we are building a 300mm wafer
fabrication facility in China that is expected to begin
production in 2010.


 



As of December 29, 2007, the majority of our
microprocessors were manufactured on 300mm wafers using our 65nm
process technology. In 2007, we started manufacturing
microprocessors using our new 45nm process technology, which
enables higher and more energy-efficient processor performance.
The benefits of moving to each succeeding generation of
manufacturing process technology can include using less space
per transistor, reducing heat output from each transistor,
and/or increasing the number of integrated features on each
chip. These advancements can result in microprocessors that are
higher performing, consume less power, and/or cost less to
manufacture.


 



To augment capacity, we use third-party manufacturing companies
(foundries) to manufacture wafers for certain components,
including chipset, networking, and communications products. In
addition, we primarily use subcontractors to manufacture
board-level products and systems, and purchase certain
communications networking products from external vendors,
principally in the Asia-Pacific region.


 



Our NAND flash memory products are manufactured by IMFT, a NAND
flash memory manufacturing company that we formed with Micron
Technology, Inc. in 2006. We currently purchase 49% of the
manufactured output of IMFT. See “Note 19:
Ventures” in Part II, Item 8 of this
Form 10-K.


 



Following the manufacturing process, the majority of our
components are subject to assembly and test. We perform our
components assembly and test at facilities in Malaysia, China,
the Philippines, and Costa Rica. We plan to continue investing
in new assembly and test technologies as well as increasing the
capacity of our existing facilities and building new facilities
to keep pace with our microprocessor, chipset, and
communications technology improvements. In line with these
plans, we are building a new assembly and test facility in
Vietnam, which is expected to begin production in 2009. This
facility will have greater square footage than each of our
current facilities, which will enable us to take advantage of
greater economies of scale. To augment capacity, we use
subcontractors to perform assembly of certain products,
primarily flash memory, chipsets, and networking and
communications products. Assembly and test of NAND flash memory
products, manufactured by IMFT, is performed by Micron and other
external subcontractors.


 



Our employment practices are consistent with, and we expect our
suppliers and subcontractors to abide by, local country law. In
addition, we impose a minimum employee age requirement as well
as progressive environmental, health, and safety requirements
regardless of local law.


 



We have thousands of suppliers, including subcontractors,
providing our various materials and service needs. We set
expectations for supplier performance and reinforce those
expectations with periodic assessments. We communicate those
expectations to our suppliers regularly and work with them to
implement improvements when necessary. We seek, where possible,
to have several sources of supply for all of these materials and
resources, but we may rely on a single or limited number of
suppliers, or upon suppliers in a single country. In those
cases, we develop and implement plans and actions to reduce the
exposure that would result from a disruption in supply. We have
entered into long-term contracts with certain suppliers to
ensure a portion of our silicon supply.





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Table of Contents






Our products typically are produced at multiple Intel facilities
at various sites around the world, or by subcontractors who have
multiple facilities. However, some products are produced in only
one Intel or subcontractor facility, and we seek to implement
actions and plans to reduce the exposure that would result from
a disruption at any such facility. See “Risk Factors”
in Part I, Item 1A of this
Form 10-K.


 




This excerpt taken from the INTC 10-K filed Feb 26, 2007.
Manufacturing and Assembly and Test
 
As of year-end 2006, 68% of our wafer manufacturing, including microprocessor, chipset, NOR flash memory, and communications silicon fabrication, was conducted within the U.S. at our facilities in Arizona, New Mexico, Oregon, Massachusetts, California, and Colorado1. Outside the U.S., 32% of our manufacturing was conducted at our facilities in Ireland and Israel.
 
As of December 2006, we primarily manufactured our products in the wafer fabrication facilities described below:
 
             
    Wafer
  Process
   
Products   Size   Technology   Locations
Microprocessors
  300mm   65nm   Ireland, Arizona, Oregon
Microprocessors, chipsets, and communications infrastructure
  300mm   90nm   New Mexico, Ireland
NOR flash memory
  200mm   65nm   California, Israel
NOR flash memory and communications infrastructure
  200mm   90nm   Israel, California
Chipsets, NOR flash memory, and other products
  200mm   130nm   New Mexico, Oregon, Massachusetts,
Arizona, Ireland, Colorado1
Chipsets and other products
  200mm   180nm and above   Ireland, Israel
 
1 Management placed for sale our Colorado fabrication facility. For further discussion, see “Note 11: Restructuring and Asset Impairment Charges” in Part II, Item 8 of this Form 10-K.
 
We expect to increase the capacity of certain facilities listed above through additional investments in capital equipment. In addition to our current facilities, we are building facilities in Arizona and Israel that, in 2007 and 2008 respectively, are expected to begin wafer fabrication for microprocessors on 300mm wafers using 45-nanometer technology.
 
As of year-end 2006, the majority of our microprocessors were manufactured on 300mm wafers using our 65-nanometer process technology. In 2007, we expect to begin manufacturing microprocessors on our 45-nanometer process technology, the next generation of advanced high-volume production process technology beyond our 65-nanometer process technology. As we move to each succeeding generation of manufacturing process technology, we incur significant start-up costs to prepare each factory for manufacturing. However, continuing to advance our process technology provides benefits that we believe justify these costs. These benefits can include utilizing less space per transistor, which decreases the size of the chip and/or enables us to increase the number of integrated features on each chip; reducing heat output from each transistor; and improving power efficiency. These advancements can result in higher performing microprocessors, products that consume less power, and/or products that cost less to manufacture. To augment capacity in the U.S. and internationally, we use third-party manufacturing companies (foundries) to manufacture wafers for certain components, including chipset, networking, and communications products.
 
Our NAND flash memory products are manufactured by IMFT, a NAND flash memory manufacturing company that we formed with Micron. We currently purchase 49% of the manufactured output of IMFT. See “Note 17: Venture” in Part II, Item 8 of this Form 10-K.
 
We primarily use subcontractors to manufacture board-level products and systems, and purchase certain communications networking products from external vendors, primarily in the Asia-Pacific region. We also manufacture microprocessor- and networking-related board-level products, primarily in Malaysia.


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Table of Contents

Following the manufacturing process, the majority of our components are subject to assembly and test. We perform a substantial majority of our components assembly and test at facilities in Malaysia, the Philippines, China, and Costa Rica. We plan to continue investing in new assembly and test technologies as well as increasing the capacity of our existing facilities and building new facilities to keep pace with our microprocessor, chipset, flash memory, and communications technology improvements. In line with these plans, we plan to build a new assembly and test facility in Vietnam, which is expected to begin production in 2009. This facility will have greater square footage than our current facilities, which will enable us to take advantage of greater efficiencies of scale. To augment capacity, we use subcontractors to perform assembly of certain products, primarily flash memory, chipsets, and networking and communications products. Assembly and test of NAND flash memory products manufactured by IMFT is performed by Micron and other external subcontractors.
 
Our performance expectations for business integrity; ethics; and environmental, health, and safety compliance are the same, regardless of whether our supplier and subcontractor operations are based in the U.S. or elsewhere. Our employment practices are consistent with, and we expect our suppliers and subcontractors to abide by, local country law. In addition, we impose a minimum employee age requirement regardless of local law.
 
We have thousands of suppliers, including subcontractors, providing our various materials and service needs. We set expectations for supplier performance and reinforce those expectations with periodic assessments. We communicate those expectations to our suppliers regularly and work with them to implement improvements when necessary. We seek, where possible, to have several sources of supply for all of these materials and resources, but we may rely on a single or limited number of suppliers, or upon suppliers in a single country. In those cases, we develop and implement plans and actions to reduce the exposure that would result from a disruption in supply.
 
Our products typically are produced at multiple Intel facilities at various sites around the world, or by subcontractors who have multiple facilities. However, some products are produced in only one Intel or subcontractor facility, and we seek to implement actions and plans to reduce the exposure that would result from a disruption at any such facility. On a worldwide basis, we regularly evaluate our key infrastructure, systems, services, and suppliers, both internally and externally, to seek to identify significant vulnerabilities as well as areas of potential business impact if a disruptive event were to occur. Once vulnerability is identified, we assess the risks, and as we consider it to be appropriate, we initiate actions intended to reduce the risks and their potential impact. However, there can be no assurance that we have identified all significant risks or that we can mitigate all identified risks with reasonable effort. See “Risk Factors” in Part I, Item 1A of this Form 10-K.
 
We maintain a program of insurance coverage for various types of property, casualty, and other risks. We place our insurance coverage with various carriers in numerous jurisdictions. The policies are subject to deductibles and exclusions that result in our retention of a level of risk on a self-insurance basis. The types and amounts of insurance obtained vary from time to time and from location to location, depending on availability, cost, and our decisions with respect to risk retention. Our worldwide risk and insurance programs are regularly evaluated to seek to obtain the most favorable terms and conditions.
 
This excerpt taken from the INTC 10-K filed Feb 22, 2005.

Manufacturing and Assembly and Test

 

As of year-end 2004, nearly 70% of our wafer manufacturing, including microprocessor, chipset, flash memory and communications silicon fabrication, was conducted within the U.S. at our facilities in New Mexico, Oregon, Arizona, Massachusetts, California and Colorado. Outside the U.S., more than 30% of our wafer manufacturing, including wafer fabrication for microprocessors, chipsets, flash memory and networking silicon, was conducted at our facilities in Ireland and Israel.

 

As of December 2004, we manufactured our products in the wafer fabrication facilities described in the following table:

 

Products


  

Wafer Size


   Process Technology

   Locations

Microprocessors

   300mm    90nm    New Mexico, Oregon, Ireland

Microprocessors and chipsets

   200mm    130nm    Oregon, Arizona, Massachusetts, California

Flash memory

   200mm    130nm    New Mexico, Ireland

Chipsets, flash memory and other products

   200mm    180nm, 250nm, 350nm    New Mexico, Israel, Colorado, Ireland

 

In 2004, we continued to transition our microprocessor manufacturing from 200mm (8-inch) wafers to 300mm (12-inch) wafers. As of year-end 2004, the majority of our microprocessors were manufactured on 300mm wafers. The conversion to 300mm wafers allows for more efficient use of our capital investment in equipment by providing more than twice as many equivalent chips per wafer as 200mm wafers. We currently expect two additional facilities to begin wafer fabrication on 300mm wafers in the second half of 2005 or the first half of 2006.

 

As of year-end 2004, the majority of our microprocessors were manufactured using our 90-nanometer process technology. The 90-nanometer process technology is our most advanced high-volume production process featuring structures smaller than the size of a virus, the world’s smallest microorganism. As we move to each succeeding generation of manufacturing process technology, we incur significant start-up costs to get each factory ready for high-volume manufacturing. However, continuing to advance our process technology provides added benefits that we believe justify these costs. These benefits can include utilizing less space per transistor, which enables us to put more transistors on an equivalent size chip, decreasing the size of the chip or allowing us to offer an increased number of integrated features. These advancements can result in higher performing microprocessors, products that consume less power and/or products that cost less to manufacture. To augment capacity in the U.S. and internationally, we use subcontractors (foundries) to manufacture wafers for certain components, including networking and communications products.

 

We primarily use subcontractors to manufacture board-level products and systems, and purchase certain communications networking products from external vendors, primarily in the Asia-Pacific region. We also manufacture microprocessor- and networking-related board-level products, primarily in Malaysia.

 

Following manufacture, the majority of our components are subject to assembly in several types of packaging, and to testing. We perform a substantial majority of our components assembly and test at facilities in Malaysia, the Philippines, China and Costa Rica. We plan to continue to invest in new assembly and test technologies and facilities to keep pace with our microprocessor, chipset, flash memory and communications technology improvements. To augment capacity, we use subcontractors to perform assembly of certain products, primarily flash memory, chipsets and networking and communications products. Our performance expectations for business integrity, ethics, and environmental, health and safety compliance are the same regardless of whether our supplier and subcontractor operations are based in the U.S. or elsewhere. Our employment practices are consistent with, and we expect our suppliers and subcontractors to abide by, local country law. In addition, we impose a minimum employee age requirement regardless of local law.

 

We have thousands of suppliers, including subcontractors, providing our various materials and service needs. We set expectations for supplier performance and reinforce those expectations with periodic assessments. We communicate those expectations to our suppliers regularly and work with them to implement improvements when necessary. We seek, where possible, to have several sources of supply for all of these materials and resources, but we may rely on a single or limited number of suppliers, or upon suppliers in a single country. In those cases, we develop and implement plans and actions to reduce the exposure that would result from a disruption in supply.

 

Our products typically are produced at multiple Intel facilities at various sites around the world, or by subcontractors who have multiple facilities. However, some products are produced in only one Intel or subcontractor facility, and we seek to implement actions and plans to reduce the exposure that would result from a disruption at any such facility.

 

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Manufacturing and assembly and test of integrated circuits is a complex process. Normal risks include errors and interruptions in the production process, defects in raw materials and disruptions at supplier locations, as well as other risks, all of which can affect the timing of the production ramps and yields. A substantial decrease in yields would result in higher costs and the possibility of not being able to produce sufficient volume to meet specific product demand. A substantial increase in yields could result in higher inventory levels and the possibility of resulting excess capacity charges as we slow production to reduce inventory levels. In addition, higher yields, as well as other factors, can decrease overall unit costs and may cause us to revalue our existing inventory on certain products to their lower replacement cost, which would impact our gross margin in the quarters in which this revaluation occurs.

 

We operate globally, with sales offices and research and development, manufacturing and assembly and test facilities in many countries, and, as a result, we are subject to risks and factors associated with doing business outside the U.S. Global operations involve inherent risks that include currency controls and fluctuations, tariff and import regulations, and regulatory requirements that may limit our or our customers’ ability to manufacture, assemble and test, design, develop or sell products in particular countries. As part of our site-selection due diligence processes, we assess several criteria, which include the property’s physical characteristics or constructability, local utility infrastructure, transportation capability, availability of technical workforce, construction and supplier capabilities, permitting requirements and investment conditions. Employment practices and labor rights issues are incorporated in the diligence. Evaluations also include ratings for security concerns, which include corruption, terrorism, crime and political instability. Security concerns alone are sufficient to remove projects from consideration. Regardless of these efforts, if terrorist activity, armed conflict, civil or military unrest, or political instability occurs in the U.S., Israel or other locations, such events may disrupt production, logistics, security and communications, and could also result in reduced demand for Intel’s products. The impacts of major health concerns or possible infrastructure disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers, on Intel, its suppliers, customers or other third parties, could also adversely affect our business and impact customer order patterns. Business continuity could also be affected if labor issues disrupt our transportation arrangements or those of our customers or suppliers. On a worldwide basis, we regularly review our key infrastructure, systems, services and suppliers, both internally and externally, to seek to identify significant vulnerabilities as well as areas of potential business impact if a disruptive event were to occur. Once identified, we assess the risks, and as we consider them to be appropriate, we initiate actions intended to reduce the risks and their potential impact. However, there can be no assurance that we have identified all significant risks or that we can mitigate all identified risks with reasonable effort.

 

We maintain a program of insurance coverage for various types of property, casualty and other risks. We place our insurance coverage with various carriers in numerous jurisdictions. The policies are subject to deductibles and exclusions that result in our retention of a level of risk on a self-insurance basis. The types and amounts of insurance obtained vary from time to time and from location to location depending on availability, cost and our decisions with respect to risk retention. Our worldwide risk and insurance programs are regularly evaluated to seek to obtain the most favorable terms and conditions.

 

For information regarding environmental matters and proceedings related to certain facilities, see “Compliance with Environmental, Health and Safety Regulations” below in this Item and “Legal Proceedings” in Part I, Item 3 of this Form 10-K.

 

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