Intel to shut plants temporarily

Intel will temporarily close two of its chipmaking plants for nine days beginning this weekend as it starts a "voluntary separation" program to reduce its workforce, CNET NEWS.COM has learned.

The temporary plant closures--which affect 1,700 workers--and the job reduction plan are aimed at cutting costs in a slower-than-expected market. Closing the factories will help reduce chip supplies, while the employee severance program will reduce the overall head count.

"Basically, we are responding to market conditions," said Bill MacKenzie, a public information officer at Intel, in confirming the moves. The company makes processors for the vast majority of the world's personal computers.

Plant closures are unusual at Intel and rarely discussed outside the company. The chip giant said earlier this year that it would lower head count by 3,000, but the new developments seem to indicate a growing aggressiveness in cutting costs.

For example, the reduction in Intel's 65,000-person workforce originally was to be accomplished mostly through attrition, not through organized layoffs. But the company is now offering severance packages to meet its goals.

Some analysts have said that Intel will have to shed even more staff to get its finances fully back on track. (Intel is an investor in CNET: The Computer Network.)

The chipmaker will temporarily shut plants 5 and 15 at the company's Aloha manufacturing facility in Oregon from July 4 through July 12, according to MacKenzie. About 1,700 manufacturing employees will be sent home without pay during this period.

While plant suspensions--called "warmdowns" in the industry--are not unheard of, they also aren't frequent. Several memory chip manufacturers have enforced temporary shutdowns worldwide this year to reduce oversupply. Intel's MacKenzie said warmdowns at the company are "not unknown but not common."

The two affected Intel factories are used to make chipsets, microprocessors, and other products, MacKenzie added, but they are not cutting-edge facilities. Both produce silicon based around the older 0.35-micron process technology, though plant 15 is being refitted to handle the 0.25-micron process.

The voluntary employment severance will begin next week. Under the program, Intel will offer payments to manufacturing workers for leaving the company. Sources close to the situation have said that Intel is considering payments equivalent to four months of regular salary, with additional amounts depending on years of service and job title.

These terms would be similar to those offered to some 650 employees Intel will lay off from a Dupont, Washington, facility beginning next month.

The positions eliminated through the separation program are part of the effort to reduce head count by 3,000, but MacKenzie said the total number of positions affected could potentially exceed that figure.