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Xiao Wang had been lucky: she got an offer from Intel China in April to work as a product manager after graduating from a top Canadian business school, while a dozen of her Chinese classmates are still searching for jobs now.

 

In July, she also narrowly survived a layoff storm, in which the senior manager who recruited her lost his job.

 

But now, she is deeply anxious, as the US chip giant is planning to cut its workforce by as much as 10 percent in two years its largest layoff since 1985, when it sold the DRAM memory business.

 

Intel said yesterday that it would shed 10,500 jobs from its workforce of 100,250 at the end of last quarter, including 7,500 this year and another 3,000 next year.

 

"These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come," Paul Otellini, Intel President and Chief Executive Officer, said in a statement.

 

The company said it was in a quiet period and suggested it would not reveal more details until it releases financial results on October 17.

 

The layoff will concentrate on management, marketing and information technology support functions, but will extend into manufacturing and product design units.

 

Nancy Zhang, a spokeswoman for Intel China, said she had no further details, as the announcement was only made globally.

 

However, analysts believe China is one area that will be heavily affected.

 

The channel platforms group, one of Intel's six business groups and the only business with its headquarters in Shanghai, has already merged with the sales and marketing groups.

 

The group was set up to design products to meet demands in different markets. Shanghai was picked to host the group, based on China's position as the world's largest manufacturing base for computers.

 

While that group and other units of Intel China launched a massive recruitment campaign at the end of last year, Intel China suddenly suspended almost all positions involved.

 

Sources with Intel China said several hundred employees would be affected. Intel now has about 6,800 people in China, including staff at two testing and assembly plants.

 

A rapid expansion of business lines and a failure to pay enough attention to market changes are the major reasons behind Intel's historic layoffs.

 

Over the past three years, the company added more than 20,000 employees and established new business groups such as one for mobile phone chips and one for digital health.

 

Finding the funding was not a problem for the Intel of three years ago, which enjoyed an overwhelming dominance in the market and had a good cash flow. But competition, mainly from AMD, has eaten away at Intel's shares and profits, highlighting the importance of maintaining a lean and efficient organization.

 

In May and July, Intel launched two rounds of price wars with AMD and by the end of the second fiscal quarter on July 1, the company's revenue stood at US$8 billion, down 13 percent, while operating income fell by as much as 60 percent year-on-year to US$1 billion.

 

Statistics from the US Semiconductor Industry Association show the shipment of computers rose by 10 percent in the second quarter over the same period of last year, but the average price of a laptop computer fell by 18 percent due to competition.

 

Simon Ye, principal analyst of computer systems with the research house Gartner, said Intel's difficulties are related to the market trend.

 

Intel, famous for controlling computer makers with its technologies and marketing strategies, was focused on expanding into new territories such as mobile phones and maintaining the Moore's Law, which is named after one of Intel's founders and says the clock speed of a microprocessor doubles every 18 months.

 

However, it failed to pay attention to computer vendors' demand for another computer chips supplier and AMD's focus on new technologies in 64 bit computing and dual-core processors, which are especially useful in handling complicated enterprise computing, won the confidence of computer makers.

 

In contrast to Intel's financial performance, AMD's net sales rose by more than 50 percent in the second quarter ending on July 2 at US$1.22 billion, while operating income grew by almost 23 percent year-on-year.

 

(China Daily September 7, 2006)