Intel Ireland's Jim O Hara tells Jamie Smyth Fab 24 will open on schedule in mid-2004 and war worries and budget cuts will not affect the company's commitment to its Irish operations.

Intel Ireland will continue to invest in its two existing Irish fabrication plants despite the prospect of war in Iraq and fears of overcapacity in the chip sector.

It will also start production at its new Fab 24 facility by mid-2004, according to Mr Jim O Hara, general manager of Intel's Leixlip operation.

In his first major interview since being promoted to vice-president of Intel's technology manufacturing group in December, Mr O Hara also shrugged off Intel's decision to slash its capital expenditure budget by $1 billion (€0.9 billion) in 2003.

Intel said last month its budget would be between $3.5 to $3.9 million this year, significantly below analyst expectations of $4 to $4.5 billion, and well below the $4.7 billion spent by Intel in 2002. Analysts interpreted the figures as evidence that Intel did not see any speedy upturn in demand for chips, sending chip stocks steeply downwards since mid-January.

But despite these gloomy forecasts, Mr O Hara remains upbeat about Intel Ireland and the technology sector.

The industry tends to be cyclical and we are sure the market will come back again, says Mr O Hara, who has 25 years' experience at Intel and Digital Equipment Corporation.

"Every year, Intel must forecast its capital expenditure going forward and we're often anticipating demand that is two to three years out," he says.

"That means we are always going to be moving it [capital expenditure] around to get it right."

There are huge penalties in terms of excess capacity if we get it wrong, but if you err on the other side you can miss demand on the upswing, says Mr O Hara.

Intel's new fabrication facility Fab 24 - which will implement the world's most advanced 300 millimetre semiconductor manufacturing technology - will begin production on schedule by mid-2004. Intel Ireland already has 500 people in the US training at similar facilities, says Mr O Hara.

He believes the construction and fit-out of the new plant will be as important a moment for Intel as the firm's decision to come to the Republic in the first place in the late 1980s.

"Fab 24 is very like Fab 10 in that our performance on that site defined Ireland to the Intel world as a place where we could start up flawlessly, on time, and within budget. Fab 24 will be a challenge because it is using the latest 300mm technology ... It will again define Ireland for Intel," he said.

Intel is employing its world- famous manufacturing technique "copy exactly" at its Fab 24 plant by drawing on their experiences of building its two existing 300mm fabrication plants in the US. This technique ensures that the design and fit-out of each facility follows the same process as other plants.

"'Copy exactly' means that we can draw on the experiences of past research and ensures that we start manufacturing at the same capacity as the previous plant. Therefore, it doesn't take more time to get up to similar production levels," says Mr O Hara.

When changes are made to the design or fit-out of Fab 24, Irish engineers know that their proposals will take effect across the entire Intel group. That's a great motivator for staff, he says.

In addition to Intel's €2.5 billion investment in Fab 24, Intel Ireland will also continue to invest in its existing fabrication facilities in Leixlip, Fab 10 and Fab 14.

"The nature of these type of fabrication plants is that every few years we have to spend some money upgrading the technologies. We are now in the process of this," says Mr O Hara, who would give no financial detail on the upgrades.

It is understood Intel is currently investing $100 million to enable its existing fabrication plants to produce a new flash memory chipset.

Previously Fab 10 and Fab 14 manufactured semiconductors for the popular pentium computer chip family, but this will now be extended to these much higher value processors.

The shift to manufacture flash memory chips at Intel's existing fabrication plants reflects the company's huge gamble on the mobility of computing power.

Intel has invested more than $9 billion over the past four years in these areas but its communications group and its wireless communications and computing group still made a loss of almost $2 billion over the past two years.

The firm is pinning its hopes on its new Centrino chipset which will be unveiled next month.

"I think the future is going to be in the convergence of mobile computers and the wireless world. The concept of anytime, anywhere, computing. We are serious about communications," says Mr O Hara.

"A lot of the design work on the Centrino chipset was undertaken in Israel but our Shannon operation is also doing research."

Pushing this type of R&D is a central theme for ICT Ireland - IBEC's technology lobby group - which Mr O Hara currently chairs. He agrees the prospect of low-cost labour can no longer attract investment to the Republic. Irish firms must move up in value, he says.

Of more immediate concern for both the global technology sector and Intel is the prospect of war in the Middle East.

Intel may benefit from an uptick in demand for chips for certain types of military product but consumer and business sentiment is weakening.

My guess is there would be more downside to upside in terms of the overall economic picture [if there is war], says Mr O Hara.

"I guess it [military demand] is a very small piece of our overall portfolio versus the economic side of it. I think overall we'd rather have stability."

But even a war against Iraq would not have a negative effect on Fab 24, according to Mr O Hara. "Intel hasn't missed a beat on the Fab 24 start-up," he says.