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Intel to Stay in Penang

Intel Corp will not move its operations out of Penang despite a manufacturing exodus to China.

President and chief operating officer Paul Otellini reaffirmed this recently, saying he was satisfied with the skilled labor, tax incentives and reliable infrastructure in Malaysia. "Much of it [production] is going well in Malaysia, and that's why we've been here and that's why we'll continue to stay here," he said.

Otellini said Intel will hire 600 additional workers this year to boost its network processor design activities and research and development on Pentium 4 packaging in Malaysia. He reiterated that skilled manpower was the key reason for staying in Malaysia, not only to continue manufacturing chips but also to design new products. Intel has a design team of about 100 engineers in Malaysia, and has filed 11 patents in the US for network and microprocessor designs, with another 20 still pending.

Intel marks its 30th year of operation in Penang this year, and has a combined workforce of about 8,000 in test and assembly plants on the island and in neighboring Kulim Hi-Tech Park. It has invested a total of US$1.8 billion in Malaysia since it started operations. Reports suggested that Intel Malaysia was in the midst of aggressive cost-cutting measures including a plan to reduce an unspecified number of staff through voluntary separation schemes.

Upturn Expected

Last year, manufacturing hub Penang took brutal job losses as plants pulled out, orders shrank, and Malaysiaケs industrial output fell by 4%. China is seen as the main culprit, sucking fresh foreign direct investments away from Southeast Asian nations struggling under the weight of the moribund tech markets.

Otellini, however, painted an optimistic picture suggesting that the company is expecting growth this year after its worst ever year in 2001. "Last year was so poor that it is very likely the industry will grow year-on-year this year, just because it's not shrinking," he said. "We are reasonably optimistic about 2002. People are buying computers again. In the first quarter we saw servers coming back and notebooks coming back, and that's a good sign." Various analysts and vendors have mirrored this sanguine outlook and believe the market has bottomed out and will pick up in the latter half of 2002.

by Julian Matthews, Kuala Lumpur

Intel Malaysia: http://www.intel.com/my/eng/index.htm

(May 2002 issue, Nikkei Electronics Asia)

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