Intel is shifting production of some of its mature products to China and Vietnam from Kulim, Malaysia and has let go around 600 workers involved in the manufacturing of these products, says a report from StarBiz, which cites sources familiar with the matter. Mature product manufacturing is being shifted to facilities in Ho Chih Minh and Chengdu, where the company can save costs on labor.
Intel shifting to lower cost bases
The Kulim facility dates back to 1995 and is involved in the manufacturing of motherboards and assembling of processor packaging. At present, in Malaysia, Intel has 8,000 employees, and 40% of then are based in Kulim.
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One of them told StarBiz, “Intel is transferring to Kulim new technology products from places like Costa Rica to support the server market and other trendy consumer electronic products.” The chip maker will keep on supporting new technology products, but the number of employees will not be more than the number that could be let go.
In April 2014, Intel announced plans to transfer its test assembly and test operations to Asia from Costa Rica to strengthen its competitive edge in new market conditions and in the high technology sector. Intel Malaysia and Singapore Public Relations Manager Zalinda Zainon said that the company always goes for a voluntary separation scheme for employees who want to depart from the company.
Data center compensating for PC decline
Experts note that Intel’s data center group is exhibiting strength and compensating for shortcomings on the PC side. High-end Intel processors are witnessing increasing adoption in data centers that need to send information and service via servers. Previously, Intel CEO Brian Krzanich said that year over year revenues were flat, but the data center market witnessed double-digit revenue growth. Also the Internet of Things (IoT) and memory businesses compensated for lower than expected demand for business desktop PCs.
The chip maker posted revenue of $12.8 billion in the first quarter, which was flat compared to the previous corresponding period. Revenue from the data center group came in at $3.7 billion, an increase of 19% year over year, whereas the client computing group posted $7.4 billion in revenue, a drop of 8% year over year. The chip maker expects to generate $13.2 billion (+/-$500 million) for the second quarter.