Filtered by: Money
Money

Intel rethinking RP options


MANILA, Philippines - Multibillion-dollar investor Intel, concerned with the growing requirements of its domestic business unit, is weighing "options" for a final decision to either stay in or leave the Philippines. Intel Technology Philippines Inc.’s senior management discussed its long-term options with employees last Wednesday night, in a meeting initially expected to be about financial results. "In an effort to keep employees informed, Intel has updated its employees that significant investments would be required to ensure the long-term viability of its factory building in Cavite," a statement Intel released yesterday quoted its media relations manager, Ma. Teresa L. Pacis, as saying. "Intel would like to reiterate that it has made no decision on this matter and is currently exploring multiple options." When called, Ms. Pacis declined to elaborate on the options, but admitted that the company has been hounded by allegations it will pack up and go to more viable sites elsewhere in Southeast Asia. "We don’t want to talk about it now. But the important thing is [that] we are open to our employees," she told BusinessWorld, referring to Intel’s 2,900-strong work force at its Cavite assembly site. Inside sources said the company set a six- to nine-month timeline for the decision. Intel, the first American semiconductor company in the country, has sinked over $1.51 billion in investments into the Philippines. The local subsidiary is the group’s second offshore assembly operations center in Asia. Its local manufacturing unit operates at a 20-hectare site inside the Gateway Business Park in General Trias in Cavite, south of Metro Manila. But the 18-year old facility can produce only "old generation" Pentium processors — an enterprise that will potentially be overtaken by operations at a $300-million plant in Vietnam. "Intel has many factories in the region which it operates on a single platform, with the same model. Hence, only the manufacturing costs vary across these factories," said Arthur J. Young Jr., chairman of the Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI), which counts Intel as a member. Mr. Young, who said he does not think Intel will leave, said power costs and other required investments would affect the competitiveness of any electronics company. "Power is only about 30%-40% of the costs, depending on the company, so I doubt if it was for this reason alone," he said. SEIPI President Ernesto B. Santiago agreed, saying, "If ever Intel makes a decision, it will be because of many factors." When asked how high power costs in the country affects their business, Ms. Pacis said, "We are one in wishing the power costs were lower." SEIPI said in a study recently that power costs in the Philippines are at the high end, at $0.11 per kilowatt-hour (kWh) to $0.12/kWh, compared to China’s $0.05/kWh-0.06/kWh. Intel recently closed its office in Bangkal, Makati, and shipped out part of its financial and accounting team to its Malaysian offices for undisclosed reasons. "We [consolidated] our business in Cavite," said Ms. Pacis. "But we still have an office in Makati, which handles marketing. These talks [Intel’s pull-out] will affect our Cavite office, if ever." Trade Secretary Peter B. Favila refused to comment when told of Intel’s announcement. Board of Investments Executive Director Celeste B. Ilagan, who reportedly met with Intel officials recently, could not be reached for comment. In a 2004 study that Intel commissioned, the University of Asia and the Pacific estimated that every P1 of Intel exports adds P2.8 to total exports. Every P1 increase in export demand for Intel products translates to a P1.52 increase in national output, the study read. Intel employs 5,000 employees in the Philippines, and generates some 36,000 jobs indirectly in allied services. Last January, Pres. Gloria M. Arroyo asked Intel’s chairman to consider the Philippines as the site for a remote diagnostics medical project. Ms. Arroyo told Intel’s Craig Barrett, on the sidelines of the Davos conference, that the local information technology sector could support Intel’s new project now being tested in Lebanon. The project uses sophisticated computers linked via the Internet to enable doctors in urban centers to diagnose of patients in rural areas. Alberto A. Lim, executive director of the Makati Business Club, was anxious about the news. "I hope it’s not the beginning of an exodus. I hope it’s the exception and not the rule, because, as I understand, they’ve been complaining about power rates. But, anyhow, that’s the complaint of every business in the country." He added any negative decision by Intel, even if only a small part of its global road map, will have a lasting impact on the Philippines. "Electronics accounts for two-thirds of our exports," Mr. Lim explained. - BusinessWorld
Tags: intel