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Intel to shut plants, affects 6,000 jobs

Posted: 23 Jan 2009     Print Version  Bookmark and Share

Keywords:IC assembly  IC downturn  test facilities  layoffs 

After declining to offer its revenue forecast for Q1 09, chip giant Intel Corp. has announced that it will close two fabs and three IC assembly factories.

The actions at what comes to four sites, when combined with associated support functions, are expected to affect between 5,000 to 6,000 employees worldwide.

Faced with the current IC downturn and slowing sales, the company plans to close two existing assembly test facilities in Penang, Malaysia and one in Cavite, Philippines. It will halt production at Fab 20, an older 200mm wafer fabrication facility in Hillsboro, Oregon. Additionally, wafer production operations will end at the D2 facility in Sta. Clara, California.

The company said it will consolidate and streamline some older capacity without impacting the deployment of new, leading-edge 45- and 32nm manufacturing capacity. The actions will take place between now and the end of 2009.

Some but not all of the actions were expected.

Cost-cutting plans
Last year, Intel was said to be "ramping down" its IC-assembly and test facility in the Philippines. Intel Technology Philippines Inc., a subsidiary of Intel, was one of Intel's major assembly operation centres in Asia.

The facility employs around 3,000 workers. To date, Intel's total investment in the Philippines is Rs.7,555.49 crore ($1.51 billion).

Intel's other IC-assembly sites are located in China, Malaysia and Vietnam. But over the years, Intel has poured more money into China, and, to some degree, Vietnam.

Then, in December, an analyst said he expected Intel to cut six to seven per cent of its total headcount, or roughly 5,000 to 6,000 employees. This was part of a series of cost-cutting moves that could save the company as much as Rs.5,003.64 crore ($1 billion) annually, according to FBR Capital Markets.

Intel denied it planned to implement layoffs.

Recently, Intel said Q4 08 net income fell to Rs.1,170.85 crore ($234 million), or 4 cents per share, hit hard by a Rs.6,004.37 crore ($1.2 billion) loss on equity investments related to its interest in Clearwire Corp.

In the year-ago comparable quarter Intel posted net profit of Rs.11,508.37 crore ($2.3 billion), or Rs.19.01 (38 cents) per share. Revenue in the three months ended Dec. 27, 2008 sank to Rs.41,029.84 crore ($8.2 billion), down 23 per cent as previously predicted, from Rs.53,538.94 crore ($10.7 billion) in the comparable 2007 quarter.

Intel said it cannot "predict product demand" for Q1 09 and has therefore declined to offer its typical revenue and profit forecast but instead will work off a temporary number that calls for a 15 per cent sequential sales decline on top of the 19 per cent drop from Q3 08.

The world's biggest semiconductor company is considered the bellwether for the rest of the chip market and its lackluster Q4 08 performance coupled with its unwillingness to offer guidance for the ongoing quarter indicates the industry might be headed for one of its worst recessions in decades.

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