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

This article was published by the Taiwan Headlines on September 6, 2006. It reports that Taiwan's suppliers of built-to-order electronics devices are expected to benefit from Intel's recent decision to cut over 10,000 jobs worldwide, because Intel may increase outsourcing order.

Major contract electronics-device suppliers in Taiwan, such as 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 recently announced that it would cut 10,500 jobs as part of a plan to reduce cost, starting in 2008. This is the company'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.

According to industry insiders in Taiwan, Intel has yet to contract TSMC to build its microprocessors. However, Intel has so far only farmed out outsourcing orders for microprocessor' south-bridge chips, as well as chipsets and some wireless chips, to TSMC.

Furthermore, if Intel scales down production at its Malaysia factory, the move will be conducive to Taiwan's chip assemblers. According to industry insiders, Intel's Malaysia factory is running at massive scale and any in-house reduction is likely to force the company to deliver outsourcing orders.

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

According to industry insiders, Intel can boost its competitiveness at a time when the world personal-computer market posts a lukewarm demand by increasing outsourcing orders to dedicated chipmakers. Indeed, the chip industry has been developing a trend in which integrated device manufacturers (IDMs) like Intel are increasing contracts to dedicated manufacturers.