Intel's job cuts deemed great boon to Taiwanese contract suppliers

Taiwanese suppliers of built-to-order electronics devices are expected to benefit from Intel's recent decision to cut over 10,000 jobs worldwide, as the world's No.1 chipmaker may increase outsourcing orders after trimming workforce as part of its efforts to reduce costs.

Taiwanese information-technology industry insiders pointed out that domestic contract electronics-device suppliers including Taiwan Semiconductor Manufacturing Co. (TSMC), Advanced Semiconductor Engineering (ASE) Inc., Siliconware Precision Industries Co., Ltd., Hon Hai Precision Industry Co., Ltd. and Asustek Computer Inc. will likely see increasing orders from Intel.

Intel announced yesterday that it would cut 10,500 jobs as part of a plan to reduce cost by US$3 billion annually starting in 2008. This is the chipmaker's largest job cut in a single case. The workforce reduction plan may affect the company's expansion plans at its 300mm wafer fabs in the United States and Israel as well as at its test and packaging facilities in Malaysia.

Taiwanese industry watchers pointed out that Intel has yet to contract TSMC to build its microprocessors, Intel's core product, but has so far farmed out only outsourcing orders for microprocessors' south-bridge chips as well as chipsets and some wireless chips to the silicon-foundry giant.

The cuts include the trim of over 1,000 workers at its packaging and test factories in Malaysia. ASE's executives pointed out that if Intel scales down production at its Malaysia factory, the move would be conducive to Taiwanese chip assemblers like their company. They noted that the Malaysia factory was running at massive scale and any in-house reduction would force Intel to deliver outsourcing orders.

ASE is testing and packaging Intel's south-bridge chips. The dedicated chip assembler has planned to spend US$200 million throughout this year expanding its output capacity for flip-chip substrate as part of its plan to convince Intel to give it north-bridge orders.

ASE is also running a facility in Malaysia handling middle- and high-end chips. The factory is likely to become Intel's outsourcing test and packaging tool.

In addition to two test and packaging factories in Malaysia, Intel is running similar facilities in the United States, mainland China and the Philippines.

Industry watchers pointed out that Intel could boost its competitiveness at a time when the world personal-computer market posts a lukewarm demand by increasing outsourcing orders to dedicated chipmakers. They added that the chip industry is developing a trend in which integrated device manufacturers (IDMs) like Intel are increasing contracts to dedicated manufacturers.

source & copyright: CENS