Chipmaker has NZ on its radar screen

By MICHAEL FOREMAN

Intel is to make further investments in New Zealand IT companies this year and will consider establishing a manufacturing facility in Australasia, a senior executive has confirmed.

Christian Morales, who was appointed as Intel's Asia Pacific co-general manager two weeks ago, said New Zealand was "definitely on Intel's investment radar screen during a visit to Auckland last week.

"Investments have been made in small companies here and we are looking for more, but whether that means an acquisition or a minority stake has yet to be determined."

Mr Morales said he was impressed with the high level of technical expertise in the country, particularly in the area of broadband networks and e-commerce software.

Last year Intel established minority stakes of between 5 and 10 per cent in 450 companies worldwide, and made several acquisitions at a total cost of $US6 billion.

Investments affecting New Zealand included the acquisition of Dialogic, a United States-based telecommunications software company that employs more than 50 people in Auckland. Intel also established minority stakes, understood to be in graphics software specialist Right Hemisphere and internet animation company Virtual Spectator, both based in Auckland.

This year Intel will spend an estimated $US8 billion on investments worldwide as part of its strategy to become the "building block supplier to the internet economy."

Mr Morales said a key objective of the investment programme was to help the companies concerned bring technology to the market faster than would otherwise be possible.

Mr Morales said the investment budget had to be balanced against increasing manufacturing capacity and he conceded that a shortage of Intel processors had caused "some tension" worldwide.

However, this was part of an "industry tightness of component availability" that was also affecting manufacturers of resistors, capacitors and power supplies as well as chipsets and processors.

While demand for Intel processors had grown by 15 per cent last year, in the first quarter of this year orders had jumped by 22 per cent to 25 per cent depending on the region.

"It's very difficult to manufacture exactly what the market wants," said Mr Morales, adding that getting a forecast made a year or two ahead wrong by 5 per cent to 10 per cent could result in a shortfall of 10 million units, more than half the output of a large factory.

Mr Morales said Intel had recently opened a second $US2 billion factory in Ireland, which would alleviate the chip shortage to some extent.

Asked whether New Zealand would be considered as a site for a manufacturing plant in the future, Mr Morales said Intel screened the location of new factories every two years or so.

He said this part of the world was already considered in that process.

The availability of skilled engineers and technicians was the most important consideration, but government incentives and cooperation in areas such as fast customs clearance were also critical factors.

Mr Morales said New Zealand's geographical position was no handicap as Intel rarely shipped from factories to markets close by.

"Flying throughout the world takes a maximum of 24 hours, so it's not such a big deal. It's a worldwide market now and the logistics are almost seamless."