Why This Recession Could Make Intel Stronger

The closing of plants and the lowering of production has been a regular event recently as companies face a worsening recession. But when I tell you that Intel has planned to close plants in Malaysia, the Philippines and Silicon Valley, it's not payment for the recession. In fact, it's the opposite.
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Most companies spend most of their money during the upturns of the economy, and are forced to cut back during the downturns. Only the most well-run companies are able to save money during the good times, and in turn invest heavily in their businesses when business is tough, at a much cheaper price than their competitors did.

As hard as times are right now, Intel announced that they will spend $7 billion over the next two years upgrading U.S. factories in Arizona, Oregon and New Mexico to produce chips based on 32-nanometer technology. Sounds dumb at first glance, but this is in fact exactly what you should look for when searching for new investments.

By expanding during the recession, Intel will be able to upgrade their plants and chips at a much lower cost. This is due to lower demand for the resources they would need to make these upgrades. When the market comes back, they will be able to offer the best product, and the most of it, rapidly increasing their market share.

Investing in their new 32-nanometer technology will allow Intel to build smaller, more efficient chips, and give them a great edge in the emerging 'netbook' market. Intel is also looking to outsource their old 45-nanometer chips to Taiwan Semiconductor Manufacturing (TSM), allowing them to cut costs and focus more on products of the future.

Intel, unlike many other companies, has figured out how to use its massive cash flow to upgrade their systems and increase market share at the lowest costs possible. With their new technology and their mammoth size, they will be unmatchable by current ailing rivals such as Advanced Micro Devices (AMD). Intel has been able to pursue its long-term successful strategy even during a terrible recession.

Obviously there are many other factors to account for, but Intel's latest moves show me that they have a dedicated, and possibly very intelligent management team. Even if global PC chip unit sales fall by a record 12% in 2009 like the Gartner Group predicts, Intel's new and emerging market share and technologies will make them a formidable force when this market returns.

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BY Vanzo
Source：caps

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