A source told StarBiz that Intel is rethinking its new investments not just in Malaysia, but also other parts of the world. — Reuters
PETALING JAYA: Chip giant Intel Corp is said to have partially paused its new chip-packaging and testing project in Penang, which is a part of the US$7bil investment announced three years ago.
The move was made amid cash flow issues that led Intel to suspend dividend payments and initiate job cuts across its operations globally.
The partial pause is likely to only affect Intel’s new plant and not its existing operations.
The company, which employs about 14,000 workers, will also be reducing its headcount by about 15% in line with the global plan.
This would mean more than 2,000 Intel workers in Malaysia are at risk of losing their jobs.
Just three weeks earlier, Penang Chief Minister Chow Kon Yeow reportedly said that Intel is continuing its expansion plans in Penang.
While he admitted that he is unaware of how Intel’s US$10bil cost-cutting plan would impact Penang, he suggested that the technology giant might not resort to retrenching its workers in the state.
A source told StarBiz that Intel is rethinking its new investments not just in Malaysia, but also other parts of the world.
Elaborating on the “partial pause”, the source said the construction of Intel’s new chip plant in Bayan Lepas is still ongoing but with a reduced headcount of workers.
“Previously, they have been moving equipment into areas where the construction is being completed. But now, the tool move-ins have been stopped.
“The management is working on a strategy to decide which projects to continue globally.
“For now, the deadline is end-September. We will know then whether the new facility in Bayan Lepas will be continued or postponed,” the source said.
Intel has not responded to StarBiz’s email queries.
The advanced chip plant was announced in 2021 as Intel committed to invest US$7bil over 10 years.
The then International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali said the investment would create over 4,000 Intel jobs as well as more than 5,000 construction jobs in the country.
It is learnt that the process for job cuts has begun, with employees allowed to opt in.“There’s a retirement package for those who have served many years at Intel. There is also another choice of voluntary separation.
“The management will evaluate the number of employees that have opted in. Only then, it will decide whether to pursue additional involuntary separation,” said the source.
Last month, Intel Corp announced that it would trim its workforce by over 15%, or more than 15,000 jobs globally. The majority of the layoffs will be completed by the end of 2024, according to the chipmaker.
Intel’s financials came under pressure after its incumbent chief executive officer Patrick Gelsinger made a major decision in 2021 to turn Intel into a foundry making chips for other companies, including competitors.Intel had previously withdrawn from the foundry business in 2018.
Gelsinger’s grand plan was to rival top foundry players, particularly the more cost-effective Taiwan Semiconductor Manufacturing Co Ltd (TSMC), as well as South Korea’s Samsung Electronics.
According to Counterpoint Research, as of the first quarter of 2024 (1Q24), TSMC controlled 62% of the global foundry market share, followed by Samsung Electronics at 13%.However, in terms of most advanced artificial intelligence chips, TSMC controls over 90% of the market share.
In 2Q24, the Taiwanese chip giant reported a net profit of US$7.6bil, which surged 36% year-on-year on the artificial intelligence chip boom.
In contrast, Intel’s relatively new foundry business declared operating losses of US$2.8bil in 2Q24. The company expects the segment’s operating losses to continue at approximately the same rate in the third quarter.
On Aug 30, Bloomberg cited sources that Intel is currently weighing options to cut losses, including a potential separation or sale of the foundry division.
The chip giant is reportedly discussing with investment bankers on various scenarios, including a split of its product design and manufacturing businesses, as well as which factory projects might potentially be scrapped.
With the top management of Intel expected to unveil its business strategy this month, Malaysia will be a key area of focus.
The country is Intel’s largest offshore site, outside of the United States.
Intel Malaysia employs professionals spanning diverse sectors such as assembly and test manufacturing, design and development, global shared services, and regional sales and marketing.
A total of 98% of the workforce are Malaysians.
According to its website, Intel Malaysia contributes about 20% to the country’s annual electrical and electronic exports.
Since 1972, Intel has invested about RM32bil in Malaysia, which is the first location outside of the United States to host an Intel factory.
Intel is one of the companies – the first cohort of multinational corporations – that ventured into Penang in early the 70s, setting the stage for Penang’s emergence as a regional hub for electronics and semiconductors.
