Intel follows AMD in cutting down operations, to fire 5,000 employees

Only a day after chipmaker AMD offloaded its handheld business to Qualcomm after having announced plans to shed jobs and cut salaries, bigger rival Intel has followed suit by announcing it would be shuttering five older manufacturing plants to ''align capacity to current market conditions.''  (See: Qualcomm acquires AMD's handheld business for $65 million)

Additionally, the company plans to close two existing assembly test facilities in Penang, Malaysia and one in Cavite, Philippines, and will halt production at Fab 20, an older 200mm wafer fabrication facility in Hillsboro, Ore. Additionally, wafer production operations will end at the D2 facility in Santa Clara, California. Consequently, some of the 5,000 employees at the plants will lose their jobs by the end of 2009, though some will be reassigned.

Slowing demand for PC chips has forced Intel to run its factories below capacity, making them less profitable. Last week, the company reported a 90 per cent drop in fourth-quarter net income. Intel, founded in 1968, may struggle to turn a profit in the current period, CEO Paul Otellini told employees.

Intel's profit for the quarter totalled $234 million, down from $2.3 billion a year earlier. In addition to falling computer sales, the firm said it was being affected by the growth in popularity of super-small laptops, known as "netbooks", as they use lower profit margin smaller and slower chips.

Intel said the decision to close the five plants would not affect continuing investment in its more modern manufacturing facilities. The company has its most modern plants in New Mexico, Oregon, Arizona, Israel and Ireland.

Taiwan Semiconductor Manufacturing, one of Intel's smaller rivals, also announced on Thursday that it was being hit by the global fall in demand for computer products. It reported a 64 per cent fall in quarterly profits.