Fab 22, which is under construction at Intel's campus in Chandler, will proceed and will begin full production later this year, say company officials. A 100,000-sf office building being built adjacent to the new fabrication plant will be put on hold until demand for chips increases. The office building was being constructed to handle the overcrowding of the staff at other office buildings on the campus, a problem that will be solved by Intel's layoffs.

Intel employs about 10% of its 87,000 workers in Arizona, most of them in Chandler. About 1,200 of those will work in the new Fab 22, which is exempt from the layoffs.

Fab 22 is a key part in Intel's strategy to debut faster, smaller versions of the Pentium 4 processor. The company has no plans to curtail its two-pronged strategy to increase revenues by finding strategic initiatives while cutting back in other areas. Intel will spend $7.5 billion this year alone to expand production and introduce new technologies, say company officials.

Fab 22 will be the first to operate with a new technology that allows microscopic circuitry to be carved at smaller sizes--13 microns-- than ever before, which is expected to lead to faster, smaller chips at a lower cost.

In 1993, when Intel first built its campus and first fabrication plant here the development spurred a wave of complementary high-tech development. The Intel campus attracted competitors, high-tech manufacturers, raw-materials providers, equipment makers and others, which have create a cluster of high-tech in Chandler, called the Silicon Desert. Fab 22 is expected to keep interest in the area up from technology related firms.