Intel Shutters Old Fabs, Plans Staff Cuts

Source: Reuters

One week after Intel reported a sharp drop in revenues, the world’s largest chipmaker said on Thursday that it would close four aging fabrication facilities, cutting another 5,000 to 6,000 employees in the process.

The closures impact plants in the U.S. and southeast Asia, including the last remaining one at its Silicon Valley offices. Intel (NASDAQ: INTC) did say that it would try to find jobs elsewhere in the company for some of the employees affected by the moves.

The cost-cutting moves come amid efforts by many of the major names in tech to cope with slashed IT and consumer spending. For instance, Microsoft today announced its first-ever layoffs in a move to trim costs as earnings slowed dramatically.

Still, the moves may not have a dramatic effect on Intel’s fortunes, industry observers said.

“Closing these plants does not have any real big impact on what the company is doing, and they’re feeling a lot of pressure to cut costs,” said Nathan Brookwood, research fellow with Insight 64.

The factories Intel plans to cut are not just old, they’re relatively small for Intel: The company has been building facilities increasingly over time, so the fabs planned for closing don’t represent a substantial percentage of capacity. As a result, the move won’t affect Intel’s manufacturing capabilities much, Dean McCarron, president of Mercury Research, told

“They’re just trimming fat at this point,” he said.

Among the closures is D2, which is adjacent to Intel’s Santa Clara offices. That plant is so old that it still makes chips in the 130-nanometer and 90nm sizes, which is several years out of date for Intel, McCarron said.

The other main use for D2 had been working the kinks out of new development processes, but that task has shifted to individual plants.

“What they seem to be doing now is process development at the factories as well,” McCarron said. “They have more than one place to do process R&D.”

The other facilities being closed are a 200mm wafer plant in Hillsboro, Ore. and two assembly test facilities: in Penang, Malaysia, and in Cavite, Philippines.

While old, they weren’t worthless facilities, McCarron added.

“I wouldn’t call them non-productive, but in terms of their importance to Intel’s leading-edge products, there’s not much connection there. The plants they are closing are using older technologies and one was a packaging and test plant.”

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