Continuing a corporate makeover that has already shed 10 per cent of the company’s workforce, Intel announced on Friday that it will close an R&D office in South Korea, promising further changes in 2007.
“This has nothing to do with the Korean market or Korean R&D in general. It has everything to do with our restructuring,” said Intel spokesman Chuck Molloy. “We will consolidate our R&D effort to gain greater efficiencies.”
The move affects a small number of workers who studied wireless technologies in an office located in Bundang, near Seoul. Intel will give them a choice to relocate, apply for jobs in other divisions or accept a severance package, he said. Their research will now be shared by engineers in some of the more than 100 R&D offices the company still operates worldwide.
Intel plans to announce additional rounds of minor cuts in coming months.
“Compared to our workforce reduction of 10,500 announced in September, this will be very small,” Molloy said. Intel will announce further job cuts through the first half of the year as it continues a plan to shrink its payroll from 102,500 people in the second quarter of 2006 to 92,000 people by the middle of 2007, Molloy said.
The move continues a series of layoffs, plant closings and division sales that began in April when Intel CEO Paul Otellini told analysts that the company would earn $9.3 billion (£4.8bn) for 2006, down from $12.1bn (£6.7bn) in 2005. The company is due to confirm those figures when it reports its fourth-quarter and annual earnings on 16 January.
Intel is still the world’s largest semiconductor manufacturer, but its grip on that title has loosened in 2006. Analysts at Gartner predicted recently that the company’s revenue would drop 9.5 per cent to $31.3bn (£16.2bn) for 2006, even though the overall market is expected to grow 11.3 per cent. Intel’s stumble has opened the door for competing semiconductor vendors to draw closer, as Samsung Electronics, Texas Instruments and Infineon Technologies are all expected to announce annual revenue growth well above 12 per cent.
Intel executives have said the company’s troubles resulted from cutting prices on its processors to boost market share during a year when PC sales growth has slumped. That strategy did not succeed in blocking rival Advanced Micro Devices (AMD) from winning over many Intel users and partners, including Dell’s decision to build PCs with either Intel or AMD chips.
Still, many analysts say Intel is now poised to rebound with a series of new multicore processors launched in recent months, including the Core 2 Duo and Woodcrest Xeon chips.