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Intel plans to relocate jobs, shut local plant

INTEL Corp plans to close its assembly and test plant in Shanghai and move those operations to a lower-cost region - a move that will affect 2,000 employees.

Even as it reins in operations in the city, the world's biggest chip maker also said yesterday that it will increase its registered capital in China by US$100 million for future expansion. Details on how the investment might be used were not revealed.

Built in 1994 with an investment of US$500 million, the Shanghai assembly facility was the company's earliest plant in China. The chip maker said it will close the local factory over the next year and move its operations to existing facilities in southwest China's Chengdu City.

The Santa Clara, California-based company said the move was made to accommodate "recent economic conditions."

As consumers scale back spending in the wake of the global financial turmoil, sales of computers, phone handsets and flat-panel TVs - all powered by semiconductors - have plummeted.

Last year, revenue for China's integrated-circuit market grew only 5 percent to 130 billion yuan (US$19 billion), compared with 25 percent expansion in 2007, according to CCID Consulting, a Beijing-based research firm.

In the quarter ending December 27, Intel reported a 90 percent drop in net profit to US$234 million. Separate figures for the company's China operations were not available.

"This year will be even tougher than 2008 as the influence of the global financial crisis expands," said CCID analyst Li Ke.

Industry experts pointed out that land and labor costs are cheaper in Chengdu than in Shanghai.

Intel said it will continue to keep its Chinese mainland headquarters and a research and development facility in Shanghai while it increases investment in its Dalian facility in northeast China, its first 12-inch wafer plant and biggest investment project in China.

Intel employees in Shanghai will be able to apply for positions in Chengdu and Dalian, the company said. It was unclear whether anyone would be laid off.

Last month, Intel said it planned to cut up to 6,000 manufacturing jobs as falling demand had left its factories operating at less than full capacity. The company said it would close five plants globally: two in the United States, two in Malaysia and one in the Philippines.

The present conditions represent "the winter of the semiconductor industry," and the solution is to reduce capital spending and wait for recovery, said Richard Chang, president of Semiconductor Manufacturing International Corp, which is the biggest made-to-order chip maker on the Chinese mainland.



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