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Site Selection TrendsSite Selection TrendsGlobal Forum: Building Science, Technology, Global Forum: Building Science, Technology, and Innovation Capacity for Sustainable and Innovation Capacity for Sustainable Growth and Poverty ReductionGrowth and Poverty Reduction

Nanci PalmintereNanci PalmintereVice-PresidentVice-PresidentGlobal Tax and TradeGlobal Tax and TradeIntel CorporationIntel Corporation

Washington D.C,Washington D.C,February 14, 2007February 14, 2007

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AgendaAgenda

Intel CorporationIntel Corporation Investment TrendsInvestment Trends Investment CriteriaInvestment Criteria Role of Governments Role of Governments Economic ImpactEconomic Impact

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Nearly 40 Years of Nearly 40 Years of Experience Experience

From our founding in 1968, we’ve From our founding in 1968, we’ve grown into the world’s leading silicon grown into the world’s leading silicon innovator with over 94,000 innovator with over 94,000 employees, approximately 300 employees, approximately 300 facilities in 50 countries, and $35.4 facilities in 50 countries, and $35.4 billion in revenues.billion in revenues.

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IrelandIrelandFab 14/24Fab 14/24

IsraelIsraelFab 8/18Fab 8/18

OregonOregonD1C/D1DD1C/D1D

Fab 20Fab 20

CaliforniaCaliforniaD2D2

ColoradoColoradoFab 23Fab 23

ArizonaArizonaFab12/22Fab12/22

New MexicoNew MexicoFab 11/11XFab 11/11X

Mass.Mass.Fab 17Fab 17

Costa RicaCosta RicaSan Jose A/TSan Jose A/T

A/T DevA/T Dev MalaysiaMalaysiaPenang A/TPenang A/TKulim A/TKulim A/T

ChinaChinaPudong A/TPudong A/T

PhilippinesPhilippinesCavite A/TCavite A/T

WashingtonWashingtonSystems Mfg.Systems Mfg.

Board Mfg.Board Mfg.

Intel’s Worldwide Manufacturing Intel’s Worldwide Manufacturing & Assembly Test Operations& Assembly Test Operations

Chengdu A/TChengdu A/T

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Investment trendsInvestment trends

Capital investment has shifted dramatically Capital investment has shifted dramatically to emerging economiesto emerging economies

Alignment of capability, cost and Alignment of capability, cost and marketplacemarketplace– Reliable infrastructure with quality service is now more Reliable infrastructure with quality service is now more

readily availablereadily available– Education commitment in emerging economies has Education commitment in emerging economies has

created a competitive workforcecreated a competitive workforce– The market place changed with the growth in Asia, The market place changed with the growth in Asia,

Eastern Europe, Latin America and METAEastern Europe, Latin America and META

If you provide the infrastructure and If you provide the infrastructure and workforce needs, the cost of doing business workforce needs, the cost of doing business becomes the competitive advantagebecomes the competitive advantage

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World GDP growth ($B)World GDP growth ($B)Top Economies: Top Economies: 2005 to 20202005 to 2020

20052005

20202020

United States

China

Japan

Germany

United Kingdom

India

France

Russia

South Korea

Italy

Canada

Spain

Brazil

Mexico

0 5,000 10,000 15,000 20,000 25,000 30,000

2005

2020

China will eclipse Japanand Western Europe

India may eclipse France

Korea may eclipse Italy

Source: EIU

• Asian economies on the rise• Western Europe declining • USA maintains primacy

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Global Manufacturing TrendsGlobal Manufacturing Trends

Number of Fabs with Construction Spendingwithin Time Period

0

5

10

15

20

25

Americas Europe &Mid East

Japan China S. Korea Taiw an SE Asia& Others

Strategic Marketing Associates, October 2006 (April 06 to March 08)

Number of Fabs with Construction Spendingwithin Time Period

0

5

10

15

20

25

Americas Europe &Mid East

Japan China S. Korea Taiw an SE Asia& Others

Strategic Marketing Associates, October 2006 (April 06 to March 08)

•Asia will keep dominating new MFG/ATM projects

•Serving the growing local markets, cost ,talent, and maturing supply chain are the key drivers

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Site Selection CriteriaSite Selection Criteria Site & Infrastructure CharacteristicsSite & Infrastructure Characteristics

– Reliable, quality infrastructure at competitive priceReliable, quality infrastructure at competitive price– Large parcel infrastructure ready Large parcel infrastructure ready – Proximity to HUB airport & global logistics capabilityProximity to HUB airport & global logistics capability

Operating ConditionsOperating Conditions– Sufficient technical workforce capacitySufficient technical workforce capacity– Adequate supply chainAdequate supply chain– Cost structureCost structure– Fast & uniform permitting process Fast & uniform permitting process – Predictable & low risk investment structurePredictable & low risk investment structure

– Favorable tax policy relative to capital intensive projectsFavorable tax policy relative to capital intensive projects– Minimal ownership or capital restrictionsMinimal ownership or capital restrictions– Open currency exchangeOpen currency exchange

Community CharacteristicsCommunity Characteristics– Experience & alignment to High-Tech industryExperience & alignment to High-Tech industry– Employee amenities & cost of livingEmployee amenities & cost of living

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Infrastructure RequirementsInfrastructure Requirements Competitive infrastructure/rates including Competitive infrastructure/rates including

utilities supplyutilities supply– Alternative locations are global and regional pricing, Alternative locations are global and regional pricing,

although competitive among neighbors, may not be although competitive among neighbors, may not be competitive to alternative locations outside the region competitive to alternative locations outside the region being consideredbeing considered

– Depending on the company, these operating costs can Depending on the company, these operating costs can significantly impact operations/financial sustainabilitysignificantly impact operations/financial sustainability

– Many locations will consider discounted infrastructure Many locations will consider discounted infrastructure costs for utility supplycosts for utility supply

Reliable utility supply w/ both Quality and Reliable utility supply w/ both Quality and ReliabilityReliability– Capability and commitment to supply the current base Capability and commitment to supply the current base – Foresight and planning for future conditions, such as Foresight and planning for future conditions, such as

growthgrowth– Support and funding to accomplish plans, both Support and funding to accomplish plans, both

technological improvements and utility system technological improvements and utility system construction requirementsconstruction requirements

– For High tech companies or those with high reliability For High tech companies or those with high reliability needs, is “independent” redundant or dual supply needs, is “independent” redundant or dual supply availableavailable

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Infrastructure RequirementsInfrastructure Requirements

Utility and infrastructure political Utility and infrastructure political environmentenvironment– The markets and technology are changing quickly, The markets and technology are changing quickly,

does this location offer stability enough to plan a long does this location offer stability enough to plan a long term investment, both financially and operationallyterm investment, both financially and operationally

Suppliers availability, talents and Mngt Suppliers availability, talents and Mngt direction to support newest innovation or direction to support newest innovation or changes in the supplying systemchanges in the supplying system

Environmental/ regulatory infrastructure Environmental/ regulatory infrastructure risks : as this climate changes, will location risks : as this climate changes, will location be at risk of supply or constrained with new be at risk of supply or constrained with new laws or actions that increase cost or put laws or actions that increase cost or put risk to operation of supplyrisk to operation of supply

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Education/Workforce Education/Workforce RequirementsRequirements

Skilled technical and business workforceSkilled technical and business workforce– Engineers of all types (electrical, chemical, material Engineers of all types (electrical, chemical, material

science)science)– Business and professional (finance, human resources, Business and professional (finance, human resources,

purchasing, etc.)purchasing, etc.)– Technicians, especially equipment (for front-end Technicians, especially equipment (for front-end

manufacturing)manufacturing)– OperatorsOperators

Accredited universities and Accredited universities and technical collegestechnical colleges– Internationally competitive curriculum, facultyInternationally competitive curriculum, faculty– Labs for research and hands-onLabs for research and hands-on– In addition to technical skills, strong English language, In addition to technical skills, strong English language,

problem-solving, data analysisproblem-solving, data analysis Strong education pipelineStrong education pipeline

– Math, Science, TechnologyMath, Science, Technology

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Role of GovernmentRole of Government

Create government policy to promote economic Create government policy to promote economic growth, via the attraction of Foreign Direct growth, via the attraction of Foreign Direct Investment (FDI), that is designed to:Investment (FDI), that is designed to:– Increase job growth Increase job growth – Increase capital flows and investment Increase capital flows and investment – Increase research, development and technological transfers Increase research, development and technological transfers – Stimulate economic growthStimulate economic growth

And ultimately to produce and maintain a And ultimately to produce and maintain a sustainable economic base that can support the sustainable economic base that can support the underlying needs of the community or society underlying needs of the community or society

And promote workforce development through And promote workforce development through partnerships with industrypartnerships with industry

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Economic ImpactEconomic ImpactCosta Rica exampleCosta Rica example

Intel: Proportion of its investment with respect

to the investment of selected categories in Costa Rica.

Averages 1997-2005

USAUSA 21.8%21.8%

Free Free ZoneZone 29.6%29.6%

IndustryIndustry 21.9%21.9%

TotalTotal 14.0%14.0%

Intel is the leading exporterIntel is the leading exporter

Intel has contributedIntel has contributed

an average of 20% to thean average of 20% to the

country exportscountry exports

• Intel has been key to boost FDI in CR total invest

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ConclusionsConclusions The door for emerging economies is openThe door for emerging economies is open

– Marketplace shiftsMarketplace shifts– Infrastructure improvementsInfrastructure improvements– Educational achievementEducational achievement

Successful locations are ones that offer the best combination Successful locations are ones that offer the best combination of:of:

1.1. Site & Location that meets our operating requirementsSite & Location that meets our operating requirements Offers a unique technical ecosystem Offers unique access to a growing market/customer base

2.2. Low financial riskLow financial risk Low business & operational risk Competitive cost (10 yr NPC model)

Economic impact can be dramaticEconomic impact can be dramatic

If operating conditions are not met, even the best financial deal will not be If operating conditions are not met, even the best financial deal will not be acceptable.acceptable.

Once operating requirements are met in multiple locations, the financial data Once operating requirements are met in multiple locations, the financial data becomes a key determinative factor, including the tax treatment and incentives. becomes a key determinative factor, including the tax treatment and incentives.

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Back-upBack-up

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Location StrategyLocation StrategyEmerging Market & Low Cost CitiesEmerging Market & Low Cost Cities

Science Science Parks:Parks:

On or near On or near University University campuscampus

Technology Technology Parks:Parks:

Suburban Suburban growth growth corridor corridor along along transportatitransportation network on network & & infrastructuinfrastructure mainsre mains

Office Parks:Office Parks:

Suburban Suburban growth growth corridor corridor along along transportatitransportation network, on network, close to new close to new residential residential areasareas

CBD/High CBD/High Rise:Rise:

Downtown Downtown business business districtdistrict

Logistics Logistics Parks:Parks:

Airport areaAirport area

Flex type Flex type space space (office & lab (office & lab capable)capable)

-Proximity -Proximity to labsto labs

-Low Risk IP-Low Risk IP

Intel user: Intel user: CTGCTG

Large Large parcelsparcels

-Good utility -Good utility infrastructuinfrastructurere

-FTZ or EPZ -FTZ or EPZ statusstatus

Intel user: Intel user: FSM, ATMFSM, ATM

Multi-tenant Multi-tenant type spacetype space

--TransportatiTransportation accesson access

-Good IT -Good IT infrastructuinfrastructurere

Intel user: Intel user: FES, Product FES, Product GroupsGroups

High rise or High rise or Class A type Class A type spacespace

-Customer -Customer proximityproximity

Intel user: Intel user: SMGSMG

Warehouse Warehouse type spacetype space

-Proximity -Proximity to airportto airport

-Customs -Customs statusstatus

Intel user: Intel user: ISNGISNGBias toward tech/science parks to manage riskBias toward tech/science parks to manage risk

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gogoodod

01 01 2020 21 21 4040 41 41 6161 61 61 8080

popooror

81 81 100100

Infrastructure Risk (2006)Infrastructure Risk (2006)Economic Intelligence UnitEconomic Intelligence Unit

Mexico

Brazil

Uruguay

Argentina

Chile

United States

Peru

Costa Rica

Honduras El Salvador

Pakistan

SouthAfrica

Ghana

Morocco

Egypt

Israel

UAE

SaudiArabia

Singapore

Malaysia

India

Vietnam Thailand

Philippines

Russia

ChinaJapan

Taiwan

Korea

New Zealand

Ukraine Hung

Latvia Lithuania

Spain

Ireland PolandCzR

Portugal

UK

GermanyBelg

HungaryRomaniaBulgaria

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Stable Economic & Political systemsStable Economic & Political systems– Minimal Ownership/Capital restrictionsMinimal Ownership/Capital restrictions

– Foreign Ownership/Business RegistrationForeign Ownership/Business Registration– Capitalization Req’ts

– Open Currency ExchangeOpen Currency Exchange– Intellectual Property registration/protectionIntellectual Property registration/protection

– Competitive Cost structureCompetitive Cost structure– Labor, Materials, Consumables, tax/dutiesLabor, Materials, Consumables, tax/duties

– Competitive Operating structureCompetitive Operating structure– Physical/Site Infrastructure, Supplier BasePhysical/Site Infrastructure, Supplier Base– Technical Workforce Capacity/FlexibilityTechnical Workforce Capacity/Flexibility– Logistics InfrastructureLogistics Infrastructure

Role of Government Role of Government