Intel on its way out of the Philippines

Abe Olandres Editor-in-chief April 3, 2008 · 3 min read

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January 2009 Breaking News!: Intel facility closure worldwide

First, it was Intel Makati that closed down. Then, Intel Philippines sold its flash division. Early April of 2007, Intel announced a $2.5 billion fab in China — that paved the way for speculations that it’s leaving the country.

Today, Eugene got wind of an imminent closure from purportedly existing employees of the Intel, Cavite plant.

From comments on the blog, there are claims an internal memo circulated yesterday that Intel is definitely moving out of the Philippines. Actual reasons vary — from high corporate taxes, to expensive electricity charges and even stealing of microchips. Our source says it’s about the structural integrity of the Cavite plant (that’s why the Laguna TechnoPark was an option).

As of this posting, I received an email from a former colleague who works at Intel Cavite and they were already informed yesterday that they are closing down the site in 6-9 months. I feel sad about this news since i knew a lot of people over there who are really good and now they need to find work. {comments Raymond on an earlier blog post}

A former employee of Intel, Cavite previously told me that when they asked the big bosses about their road map, none was given. The existing plans were only up to 2010. That prompted the employee to jump off and resign as he says it signals an unknown future for the company.

What’s more surprising is that the announced closure will happen as early as 6 to 9 months. Will post additional info later — trying to get a hold of that internal memo.

Intel may be really moving most of its Asian operations to China. That’s where cheap labor is abundant. Intel still has assembly test sites in Kulim & Penang, Malaysia, Pudong & Chengdu, China and Ho Chi Minh City, Vietnam.

Update: This has been confirmed by people from inside. The internal memo was circulated yesterday. There’s still no formal Corporate Announcement though. I’m still trying to get a copy of that memo.

Update 2: The plant will shut down in 6 to 9 month. The back-up plan is to find another location in the country, possibly Laguna TechnoPark or just totally shut down. Plans are not clear yet. Even 12 months lead time is not enough to shut down an Intel plant that big. Most employees are still in the dark.

Update 3: This is the copy of the internal memo we got from inside:

Intel gives update to employees in Cavite
Posted April 2, 2008

Intel leaders in the Philippines told employees Wednesday that significant investments would be required to continue operating the CV1 building, which houses our Assembly and Test operations in Cavite.

In meetings with employees, Intel leaders said they are exploring multiple options for Intel’s long-term presence in the Philippines, which could include the possibility of a smaller operation. Efforts to improve the overall efficiency of Intel’s Assembly Test network have allowed the company to reduce our total amount of floor space required.

Intel leaders in the Philippines say that our plans in that country will be announced to employees by the end of Q2.

Okay, that’s vague.

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Abe Olandres

Editor-in-chief

Abe is the founder and Editor-in-Chief of YugaTech with over 20 years of experience in the technology industry. He is one of the pioneers of blogging in the country and is considered by many as the Father of Tech Blogging in the Philippines.

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136 Comments

Boy · 18 years ago

70% of Intel Phils. employees have to say GOODBYE before Christmas.

Subthirteen · 18 years ago

It’s always the bottom line and it always will be. It’s a dog-eat-dog world out there. Why stay in one place, when moving to another means better return on investment. For as long as RP is the better choice (businesswise), they’ll be here. When it doesn’t make sense anymore (businesswise), bye-bye!

Rihana F · 18 years ago

American companies policy on laying off employees, relocating a company to another state or country is to make advanced notices to employees from 6 months to one year about their intentions of doing so. Once they announced that they are preparing your severance package, they really mean it. If employees leave before they close the plant, you wont get any severance pay.

American companies saves lot of money in term of paying salaries of overseas employees. They moved their business to third world countries mainly for CHEAP LABOR COST. This companies are saving a lot for bringing their factories in Philippines or Malaysia.

On the other hand, due to political unrest in the PI, theft among the employees & other factors contributes to the planning of closing the factory in the PI.

The labor cost in USA is very high, employees are paid by the hour according to union rate. They great benefits that includes Medical Insurance, vacation pay, sick leave, maternity leave, retirement plan,union protection & many others.

Union workers normally earns between $10.00 up to $20.00 & more per hour in USA. This high union rate per hour is what makes the American Companies moved their operation overseas like China where they pay the workers less than a dollar an hour.

I used to work for Intel Corporation in USA ( I am an office worker not a factory worker ) and I get paid over $20.00 per hour. The salary is based on your skill, education and experience. A call center agent in USA gets paid between $10.00 to 18.00 per hour..In the Philippines, call center are paid less than their counterpart in USA. What I am saying here is American companies are doing unfair labor practices in Asia/Philippines. They are under paying their employees…….they bring their business in Asia because of CHEAP LABOR.

argonaut 86a · 18 years ago

I used to work for Intel and left a few months before the closure being announced.

I did some business travel as part of the job and got to see the Intel sites in Pudong/Shanghai, Chengdu (then under construction) both in China, and Penang/Malaysia. The Intel site in Bangalore, India is more R&D and not manufacturing.

I am proud to be a Filipino because I believe in the output of the Pinoy once put to task — hence the monicker “Great Filipino Worker” – the respected collective “nickname” our Pinoy Expats around the globe.

But I cannot be proud of the following:
– our infrastructure is years (no, decades) behind China and Malaysia. Just look at the kind of road that the Intel Truck travels everytime a shipment of chips needs to be sent to FedEx in Angeles, Pampanga (in Subic).

– our government and the way its being run. China offers a lot of incentives just to get MNCs come in (there might be some ulterior motives behind it – but that’s another story) while Phil even planned to tax Intel…its like being “penny smart, pound foolish”.

– within Intel Phils — there were lots of concerns about theft of chips and it seemed the whole things is highly-organized – that truly put a damper on whatever pride we have for Filipino work efficiency and quality.

Like we used to say back when I was still working in Intel — “Change is the only constant thing. Change is good.” — This might be hard to swallow for most of the manufacturing specialists who will end up losing their jobs but it is something that’s bound to happen sooner or later with all the issues mentioned above. It is a good thing that a company like Intel will surely provide a generous separate package for employees.

But its not all about the Philippines as an investor’s destination being non-competitive in a lot of ways …let’s face it, the demand for the product has slowed down “globally”, if not for all chipmakers, it is true for Intel. So much so that even development programmes for the Dalian Fab site and the Vietnam Assembly Test factory has slowed from a “go,go,go” gung-ho attitude a few years back. This is driven by the flattening demand roadmap.

If the demand is as robust as before…I truly believe that Intel will keep the Philippines site regardless of all issues. You may have lousy roads, occasional chip thefts (we called them HVI issues – “high value inventory”), and a building structural issue that begs millions of $$$ worth of upgrade — but if the volume requries CV to keep its light open, it would stay open. Phils account for 30-40% of the overall Intel volume of manufactured CPU chips and other chipsets.

You don’t kill a goose that lay golden eggs no matter how old that goose is…as long as the golden eggs keep coming.

But like a fairy tale gone wrong — the Philippine goose will now be off to the slaughter house, as a China Peking Duck can now give the same output at less cost.

Intel hires smart people. And the smart people at the top knows when to quit and give up on a country that shows a dismal ROI.

Of course they can’t say that to Arroyo’s face can they? So they just pin it down on Intel Cavite’s building integrity.

Good old Intel spin.

lot · 18 years ago

actually hindi lang naman ang sa Phils ang nag nanakaw ng mga chips kundi sa lahat ng intel site or sa lahat ng company meron niyan, medyo madaldal lang talaga tayong pinoy kaya nailalabas iyan, compare sa ibang bansa itinatago nila ang mga bagay na ito.
at sa issue naman ng quality ng labor ng pinoy at abilidad natin angat tayo sa ibang asian counterparts like china, viatnam, or malaysia walang binatbat yang mga iyan, believe me kapag nakatrabaho mo sila saka mo malalaman ang sinasabi ko sa inyo, and if you heard the previous news about sa mga engineer na nag apply sa intel viatnam ang daming bumagsak mas madami pa ang bumagsak keysa pumasa, at ang ibang asian country na iyan sa pinas lang naman sila nagaaral ng college or english languages diba like ang mga tiga Korea, Viatnam or sometimes China tapos kapag marunong na silang mag english mayabang na sila. I’m still proud to be a Pinoy but what I don’t like is our government.

Satsarutsot De la Cruz · 18 years ago

According to my cousin, who is now working at Intel right now, one of the ain reasons why intel will move out from the philippines is because of STEALING being done by some of the employees, how sad naman, corruption is not only in the Government but also in private sector, there are employees who get school supplies from intel for their children, ang kakapal ng mukha ano. Eh ano ngaun napala ng emplyado, eh di lalon wala

jolas · 18 years ago

we’ll i totally aggree that Intel prey on developing countries and when its no longer profitable they life for other developing countries to do their business.
Intel Cavite was just used as training ground for other Intel Factory sites, employees from Malaysia, China, Vietnam were sent to Intel Cavite to be trained with this “COPY Exactly” concept. Bottomline is we Intel Filipinos were used. What is sad is that Intel Corporate Management doesn’t even have the decency to face the workforce when they announced the upcoming shutdown. They send over a GM from China to do it and this person even cannot answer all the questions of the employess. HELLO! When you did your Groundbreaking and Factory Opening the Big Bosses from Corporate are there! Now you send someone to soften the Blow?

Paulo Oteleni · 18 years ago

@bree

Every company is always on the lookout for the “bottomline”. Most especially these days when the U.S. financial markets are headed for a slowdown or outright recession.

About your “talented employees” argument, actually most of the talented veterans in Intel Cavite have already left for greener pastures in the past. What you have there are your usual moderately experienced people. In fact, Intel Cavite in the past years have been forced even fresh graduates to be sent abroad for training.

China and Vietnam today are not the same China and Vietnam we know from the past. When it comes to training, the Chinese and the Vietnamese can be easily brought up to speed. So no issue there.

With regards to revenue, Intel has this policy called “Copy Exactly”. Meaning its factories in the Philippines should be identical with those in any other Intel factory in the world. So if all plants are indentical, then the competitive edge will then shift to tax incentives, cheap employee salaries, low cost power rates, and other stability factors, which sadly, Philippines can no longer become competitive.

Ronald J Riley · 18 years ago

This is a sad story which is being repeated all over the world.

I repeat, that if you want lasting prosperity you must not allow companies like Intel to milk your inventors. You need to insist that employed inventors are paid a fair royalty. That money will fund domestic startups. When the transnational corporation leaves you will have the foundation to grow beyond their presence.

Readers of this who are aspiring inventors can get help from http://www.InventorEd.org/novice/ . You can get one on one help via our email based discussion group Inventors-L.

I urge everyone to start laying the foundation to control your own destiny. This is what inventors have been doing in America for a very long time.

Ronald J. Riley,

Speaking only on my own behalf.
Affiliations:
President – http://www.PIAUSA.org – RJR at PIAUSA.org
Executive Director – http://www.InventorEd.org – RJR at InvEd.org
Senior Fellow – http://www.patentPolicy.org
President – Alliance for American Innovation
Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
Washington, DC
Direct (202) 318-1595 – 9 am to 9 pm EST.

bree · 18 years ago

I’m sure a lot of Intel employees are looking forward to the separation packages they’ll be receiving. Why not, if all they’ve been getting from the company are false hopes. Intel never makes major decisions and announces them without looking into alternatives. The fact that they’re saying they’re still looking for alternate site is unbelievable. Its sad because the last thing our country needs is more unemployed people and lower exports. Imagine just how much this will affect our economy, when our number 1 export are semicons.

bree · 18 years ago

Their chairman is always looking at the bottomline, how to save a few dollars. What I can’t figure out is that how can they just move out of the Phils when some say the Phil plant account for more than half of the revenues of the company worldwide even if we have the highest power rate? They can move to China but I doubt they will find the same level of capable employees they’ve been enjoying here. They’ll still have to train them.

Abe Olandres Editor-in-chief · 18 years ago

Yup, he was only there for a year or two.

Paulo Oteleni · 18 years ago

By the way, I just want to add:

Reading this article by yuga saying when an Intel employee learned from his boss that there was no roadmap anymore, he immediately resigned.

I think the best option right now for current Intel employees in the Cavite plant, is simply to just stay put and wait for the separation package. This is most especially applicable for longer tenured employees.

If you’ve been employed less than 5 years, then maybe getting a new job and jumping ship now, can be a more attractive option. But if you can still wait 6-9 months, why not wait for the FREE MONEY? Perhaps the global economy would start picking up again by that time, so there will be fresh new employment opportunities elsewhere.

Paulo Oteleni · 18 years ago

Put yourselves in the shoes of a General Manager.

Would it really make sense to leave a “fragment” of your manufacturing operations scattered across the globe? When you could easily fold them into a LARGER operating unit that is already existing and running efficiently somewhere else?

A fragmented operations will cost more, than an integrated one. And besides, the worldwide economy is slowing down brought about by the current subprime crisis in America. It is therefore prudent for multinational businesses like Intel, to really weigh its options at this time.

So it looks like the odds are really not going for Intel Cavite.

You’ll just have to answer this question: Will Intel be in a “disadvantage” position in its business if it will close down its Cavite plant? If the answer is NO, then the Cavite plant is REDUNDANT. It will not be a surprise if it gets the axe. Anything redundant in the corporate world always gets the axe.

lolo jose · 18 years ago

All this boils down to former President Ramos’ drive to secure questionable IPP (Independent Power Producers) contracts which paved the way for an oversupply of electricity and, thus, very high power rates. Not only that, President Arroyo added to the burden of the Filipinos, while being indebted to Ramos, by carrying out Ramos’ unfinished business with the IPPs.

The link: http://www.pcij.org/stories/2002/ramos.html

m1 · 18 years ago

Sobrang mahal n tlaga ng operating cost sa Pilipinas. Vietnam, malaysia, China are better options for those MNCs to transfer/set up mfng sites coz at the end of the day what matters to them is COST. Sa mga tga Intel lipat na lang kau ng TI with their expansion sa Clark – ng matikman nyo ang bangis ni Roy Rico at Bing Viera (love TI…the best!!!). Hopefully, this announcement of Intel will not impact the expansion plan of TI sa Pinas. Although with this US economy recession news, ive heard na demand significantly dropped in every sector (electronics/semicondort, mfng, etc) everywhere starting this qtr and till next yr.

elmer · 18 years ago

Philippine govt are to be blamed bcoz of high tax, high power, high corruption, etc

JC John SESE Cuneta · 18 years ago

Well, Filipinos love “excessive” “freedoms”.

Oh, can I say, welcome to “Capitalism”?

I’m a Socialist :p Capitalism and Communism will only suppress the people. And too much freedom is not good for us, we need to use our brains, not our mouths.

One more thing, since it was also mentioned, I want to say thanks to our current form of government. (I believe in the Federal+Parliamentary system.)

Shuhung · 18 years ago

Karamihan kasi sa mga Pilipino, marereklamo, mayayabang. Makikita rin yan sa ibang (hindi naman lahat) empleyado ng Intel. Sa cafeteria, sinisigawan nila yung mga service crew kapag umoorder sila o kaya kapag hindi nila gusto yung ulam. Nasa jeep pa lang at wala pa sa Intel, nakasabit na kaagad yung ID, akala mo mawawala sila… proud na proud sa ID nila. Kung manlait ng ibang tao, ganun na lang, kinikilatis pati hitsura. Pare-pareho lang naman silang mga emplyedo ng Intel. Lahat may karapatan na magtrabaho at hindi laitin ng ganun na lang. Ngayon, matatauhan na yung mga mayayabang na yun. Buti nga sa inyo.

kutsokutso · 18 years ago

…peso isn’t strong. the u.s. economy simply crashed. if you based the exchange rate to, let’s say the, yen or british pound, not much have change.

software might be the way to go, but you’ve got stiff competition from the eastern block and india. but there’s good news. people in India no longer find call-center jobs attractive and are moving out of the business fast.

abc123 · 18 years ago

hie all,

i heard of this news when i reported to work today at intel penang….being a dedicated employee for the past 2.5 years, i have seen new and existing products come and go…but then normally those products that are being transfered to other plants normally does not come back to malaysia until it is end of life, but strangely that is what is happening now…those products that are supposed to die in cavite is now back in intel penang….perhaps a greater signs of intel philippines on a verge of closure??? only time will tell….

Reader from Europe · 18 years ago

A little bird told me that those who would be retrenched will receive two years worth of salary as separation pay. Not bad, eh?

Meanwhile, an IT editor from a leading Philippine daily said that the Intel Philippines spokesperson was “denying this news to death” when he wanted more details.

Ronald J Riley · 18 years ago

Transnational tech companies like Intel and other members of the Coalition for Patent fairness and PIRACY are well known for what many people believe are at best questionable business tactics. I believe that this is true of their operations in both developed and developing countries.

In all cases their business practices are designed to extract the highest profit possible regardless of what the impact is on others.

Transnational corporations are exploiting developing countries in may ways.

Most developing countries understand the value of their natural resources even as they fail to recognize that their people’s inventiveness may well be their most important natural resource.

It is a fact that transnational corporations will only stay in a developing country until another comes along which is ready to give them a better deal. This is what is happening today.

But there is something developing countries can do to ensure that transnational corporations cannot leave your economy devastated. You need to nurture and protect your inventors from being exploited. The answer is to require that corporations pay your inventors a fair royalty based on the value of an invention in addition to their base pay.

This will help fund domestic invention based business with community ties anchoring those businesses. Otherwise these predatory corporations will take the best inventions for virtually nothing and your people will be totally exposed to the whims of these companies.

Ronald J. Riley,

Gerald · 18 years ago

The announcement is really vague. The night after the announcement, was really emotional. They’re telling they gonna find a new, hope it’s not a false hope.

Blue Dolphin · 18 years ago

Yes, Intel Philippines will shut down after 34 years of presence. It was able to deliver quality products even in the events of political unrest, unstable economy, numerous coup d’etats, super typhoons and floods, power outages, a volcanic eruption, etc.

Blame it also on the corruption of the government, from the barangay level up to the evil president.

ramil · 18 years ago

Paging MERALCO, taas daw ng singil nyo!

Totoo naman kaya maraming business nalulugi dahil sa taas ng electricity rates!

Hoy Meralco maawa naman kayo sa mga pinoy na nawawalan ng trabajo dahil nagsara ang company dahil kaswapangan sa PROFIT!

hoo · 18 years ago

It would be hard and costly to transfer to another building with all the machinery and tools. I think building transfer would be hard. Significant amounts of time, labor and money are needed to do this. And to do this in just about 6 or 9 months, while doing production on the fly? Itâ€™s practically impossible.

SELaplana · 18 years ago

hmmmm….. that’s the reason why I hate to work for a company… you’ll be hired today soon, you’ll be laid-off….I rather put my own business….

Eugene · 18 years ago

The LiveJournal blogger I quoted in my post left a comment clarifying that until Intel makes an official announcement, everything is just complete speculation. It’s a bit definite that Intel will be closing CV because of structural defects but it’s still possible that they’ll move elsewhere in the country such as in Laguna.

onator · 18 years ago

Hmm I think what really did intel CV in is vietnam (if truly it will be closing down). Being an Intel-Ex employ I really am saddened, pero sayang kakaalis ko lang sana mas maganda nakuha ko package hehe. Anyway after 30 plus years in the philippines it ruly is a legacy. pero pano ka nmn to compete with cost in terms of china and vietnam. ang dami govt incentives dun. the only viable reason to set up here is the wrokforce, and now that is deteriorating because of the level of education in science and techno. coupled with a weak dollar plus some integrity issues (theft of chips, that really happens. as a business will u still continue to invest here?

Borgy · 18 years ago

The $2.5 billion fab in Dalian, China has nothing to do with the Philippine site closure. A fab produces the wafers that supplies an assembly site like the Philppines, so building a Fab site means there is a need for more Assembly sites, not less. But then, there is the Assembly site Vietnam, and an expansion in Malaysia, and another site in China (not the Dalian Fab). The point here is that the Dalian site is a false flag. It was something else.

Borgy · 18 years ago

Chinese labor is actually not cheaper, but more expensive than Philippines. Labor cost is not the only reason.

Gecko · 18 years ago

By the way, Intel is not the leader, TI is.

goo · 18 years ago

Exit Packages were already presented to the employees. That’s the main evidence that the company is really on the heels of closing down the site.

BrianB · 18 years ago

I mean macs deteriorated when Apple outsourced it to China.

Jeffrey · 18 years ago

BrianB, Mac uses Intel chips.

Dont look down on China’s quality of labor. They have good programmers. Also they don’t complain a lot unlike Pinoys.

Strike dito, strike doon!

Jagdu · 18 years ago

I don’t think it’s really a “ramping down” as much as that is a cover for “lower labor rates”.

Raymond · 18 years ago

I would think long term, it would be beneficial for the company as they were building sites not only in China but also in Vietnam and Malaysia which I believe are greater in terms of operating capacity. At the end of the day, just like any other company, it is looking into operating cost that greatly affects the unit cost of the product being built. Let’s wait and see in 6-9 months with this so called “ramping down”.

Chris · 18 years ago

I think this was because of the merger that happened last year.

Jagdu · 18 years ago

With Intel clearly the leader, why outsource to China and lose productivity, have increased costs of new equipment, train thousands of new employees, just to save a few bucks!

vance · 18 years ago

Rumors also states that Dell Sites in manila would be closing..

Aside from manila, rumors has it that the India Sites will also close down. The reason stated on a site is that the US market is down and I guess that includes cost… The Site will be moved back to US. This will happen in 3 years.. Again rumors..

BrianB · 18 years ago

Very bad for Intel to go to China. They’re well ahead in the chip market. It doesn’t make sense to rely on a labor force that will surely bring down your quality for a little profit. But what do I know, I’m just a Mac user.

Ordnacin · 18 years ago

It’s not just labor that’s cheap but the whole cost of doing business here. The way things are setup here you’d think the government didn’t want you to invest in a business…

Miguel · 18 years ago

Maybe it means that the Philippines is too expensive for manufacturing-type operations, and software is the way to go (biased!)

JC John SESE Cuneta · 18 years ago

That’s sad. So now, the “great” Filipino labor force is no match for the cheap-labor that China offers.

Money outweighs result efficiency nowadays?

jhay · 18 years ago

Whoah! This is something serious. I know a friend of mine who’s a fresh college graduate who just got hired by Intel. Will this mean his first job would be just 6 months long? Tsk tsk

coreduo · 18 years ago

yes… intel management announced that it plans to close down the CV1 factory within 6 to 9 months. this announcement was made yesterday. the management staff also presented the amount of separation pay employees will receive based on their tenure with the company. some employees are sad, but i think many are happy because of the very nice separation package :-)

Mindanao Bob · 18 years ago

The Peso is so strong that American companies have little incentive to do business in the Philippines now. Electricity costs are among the highest in the world. Labor is expensive here compared to neighboring countries. Frankly, I’m surprised that Intel stuck around as long as they did.

Eugene · 18 years ago

Spoke to soon. Here’s Erwin’s article released a few hours ago: http://newsinfo.inquirer.net/breakingnews/infotech/view/20080403-128145/Intel-ramps-down-operations-in-RP

It may help clarify some rumors. Or not.

Eugene · 18 years ago

Weird. Maybe the management of Intel Philippines is intentionally being vague about the whole thing? The impression employees are getting is one of closure, not moving to Laguna or scaling back operations. I think we can expect more developments in the coming days. (I’m already expecting Erwin Oliva to write an article about this in Inquirer.net, hehehe.)