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Intel to close unit in Shanghai as part of global rejig

By Wang Ying (China Daily)
Updated: 2009-02-07 07:57

Intel will also inject $110 million into Intel China Ltd, the company's investment holding company based in Shanghai, to enhance its investment power in China.

Special Coverage: Coping with Financial Crisis Related readings:  Intel says to shift 2,000 jobs out of Shanghai  Intel to cut 6,000 jobs, close plants  Intel buys into cleantech company  Intel sets up $500m fund to invest in China

Intel decided to optimize the configuration of its manufacturing resources in China, considering the bleak economic outlook, said Nancy Zhang, Intel China's director of public relations.

An Assembly and Test operations plant in Shanghai Pudong will be closed over the next 12 months and its resources integrated into Intel's Chengdu division, Zhang said.

The plant's closure will affect about 2,000 employees, but they will have options, said Zhang. Intel has already promised to provide post transfers for the workers to the Chengdu plant, Intel's still-under-construction Dalian plant or other Intel China divisions.

"Intel is a company with an international presence and is not immune from the global recession and such strategic adjustment are necessary," said Zhang.

But Shanghai will remain the site of Intel China's headquarters and its research and development base.

Intel's commitment to its other operations in China will not change, she said.

Workers walk out of an Intel plant in Shanghai. Zhao Jing

"Intel will continue to support China's traditional manufacturing industry upgrade and will keep bringing information technology to the country's rural areas and fulfill its corporate social responsibilities in China," said Zhang.

Intel's profit slumped 90 percent last quarter and CEO Paul Otellini raised the possibility of a loss during an interview with Bloomberg News.

A loss would end its run of 87 quarters, more than 21 years, of turning a profit.

"Intel's loss is in accordance with market expectations," said Zhao Xiaoguang, an analyst with Dongfang Securities.

Downstream dealers narrowed their demands for semiconductors in an effort to consume their inventory, starting in the last quarter of 2008, Zhao said.

The shrinking demand will result in huge losses for IT companies, including Intel, he said. "If you look around, almost all the big names involving semiconductor production, such as Hitachi and NEC, are getting hit with huge losses."