Another chip project is suspended, 2,000 employees face unemployment

Sources said Intel has partially suspended a new chip packaging and testing project in Penang, Malaysia , which was part of a $7 billion (about 50 billion yuan) investment announced three years ago.

The move comes as cash flow problems have caused Intel to suspend its dividend and begin laying off employees around the world. The partial shutdown will likely only affect Intel's new factories and not its existing businesses.

Intel, which has about 14,000 employees, will also cut about 15% of its workforce under the global plan. This means that more than 2,000 Intel employees in Malaysia are at risk of losing their jobs. The chipmaker said most of the layoffs will be completed by the end of 2024.

Just three weeks ago, Penang Chief Minister Chow Kon Yeow said Intel would continue with its expansion plans in Penang. It is not known how Intel's $10 billion cost-cutting plan will affect Penang, but it hinted that the tech giant may not lay off employees.

Sources said Intel is reconsidering new investments in various regions around the world, including Malaysia.

The sources detailed a "partial pause" in the project, saying construction of Intel's new chip factory in Bayan Lepas, Penang, is still going on but with a reduced number of workers.

“Previously, they had been moving equipment to areas where construction was being completed. But now, the equipment move-in has stopped. Management is formulating a strategy to decide which projects to continue globally. It is expected that by the end of September, the results of whether the new Bayan Lepas plant will continue or be postponed will be given,” the source said.

The construction of this advanced chip factory was announced in 2021, with Intel pledging to invest $7 billion over 10 years. At the time, it was reported that the investment would create more than 4,000 Intel jobs in the country as well as more than 5,000 construction jobs.

It is understood that the layoff process has begun and employees can choose to join. "For those who have worked at Intel for many years, there is a retirement plan. There is also another option of voluntary resignation. Management will evaluate the number of employees who choose to join. Only then will it decide whether to conduct additional involuntary resignations."

At the end of August, there were reports that Intel was weighing options to cut losses, including the possible separation or sale of its foundry division. Intel is reportedly discussing various options with investment bankers, including splitting its product design and manufacturing businesses, and which factory projects might be canceled.

Intel executives are expected to announce their business strategy in September, with Malaysia being a key focus.

Malaysia is home to Intel's largest overseas factory outside the U.S. Intel Malaysia employs professionals from various fields such as assembly and test manufacturing, design and development, global shared services, and regional sales and marketing, with 98% of the workforce being Malaysians.

According to Intel Malaysia's website, the company contributes about 20% of the country's annual electrical and electronic exports. Intel has invested about RM32 billion in Malaysia since 1972. Intel was one of the first multinational companies to move into Penang in the early 1970s, laying the foundation for Penang to become a regional hub for electronics and semiconductors.