Intel Philippines to close; 1,800 to lose jobs

April 1 (Bloomberg) — Rosemarie Maglalang and her husband made a living out of housing and feeding Intel Corp. factory workers in the Philippines for the past 13 years. That livelihood is about to disappear.

 

The world’s biggest maker of semiconductors will close its chip-assembly factory in General Trias later this year, leaving 1,800 workers jobless. The township south of Manila will lose its largest employer, which Intel says accounted for 36 percent of the province’s real domestic production in 2004.

“This is the worst thing that has happened to our municipality,” Maglalang, 42, said as she took a break from cooking chicken adobo, a Philippine delicacy. “It’s unthinkable.”

 

Asia’s developing economies lured multinationals such as Sony Corp. and Texas Instruments Inc. in the past four decades with cheap and abundant labor, and the factories in turn created jobs and spurred growth. Now the world’s largest companies are shutting those plants in the global recession, threatening communities that have grown dependent on them.

 

Tokyo-based Sony, the world’s second-largest consumer electronics maker, said in December that it would cut manufacturing sites by 10 percent from 57 by March 2010 and eliminate 16,000 jobs. U.S. hard-disk-drive maker Western Digital Corp., and Toyota Motor Corp. and Panasonic Corp. of Japan plan to fire workers and shut or sell plants in Thailand, Malaysia and the Philippines amid falling demand.

 

Plunging Exports

 

Intel’s shipments through the Philippines totaled $5.83 billion last year, more than 10 percent of the nation’s $49 billion in export revenue. The country’s dependence on foreign manufacturers is already hurting its economy: Exports slumped 41 percent in January from a year earlier, the biggest drop since at least 1981.

 

“These multinationals will go and stay in countries where incentives are better” as they lower costs, said Ernesto F. Herrera, secretary-general of the Trade Union Congress of the Philippines, the nation’s largest organization of labor groups. “It’s purely business.”

 

The global economy is likely to shrink this year for the first time since World War II, swelling the ranks of the poor by 46 million and increasing poverty in 43 developing countries, the World Bank estimates. In the Philippines, almost a quarter of the 94 million population already lives on less than $1.25 a day. The jobless rate, at 7.7 percent, is among Asia’s highest.

 

Cutting Jobs

 

Osaka-based Panasonic, the world’s biggest consumer- electronics maker, said in January it would slash 490 jobs in Malaysia and 60 in the Philippines by shutting three plants. Toyota, based in Toyota City, Japan, offered 300 temporary workers in Thailand early retirement in December. General Motors Corp., the largest U.S. automaker, has cut 790 positions in Thailand, paring its local workforce to about 2,000.

 

The Philippines predicts about 800,000 workers at home and abroad will be let go by companies. President Gloria Arroyo, 61, is spending more on roads and bridges this year to spur employment, giving her government the biggest budget deficit since 2004.

 

If you can’t explain it simply, you don’t understand it well enough. – Albert Einstein

 

“The closure of this facility will reverberate economically,” said Arlita Narag, a spokeswoman for Intel’s Philippine unit. “Of course everyone is sad, but we have no choice. Every possible option had been studied.”

 

When Intel started building a factory to test and assemble semiconductors on a former pineapple plantation in General Trias in 1995, Maglalang was a housewife in a one-bedroom shack.

 

‘Silicon Valley East’

 

By 2008, the community was thriving after Japanese electronics maker Toshiba Corp., U.S. mobile-phone chipmaker Cypress Semiconductor Corp. and Korea’s Samsung Electronics Co. joined Intel in the Gateway Business Park, 35 kilometers (22 miles) from Manila. It was dubbed “Silicon Valley East” by then-President Fidel Ramos.

 

Maglalang opened a small eatery in 1995 to feed workers building Intel’s plant. Now, she and her husband also own a boarding house and a store selling shampoo and soap to the factory’s employees. They earned enough to send three children to private school and expand their house to three bedrooms and two kitchens.

 

“We were feeding around 150 people three times a day” at one point, said Maglalang, who earns about 10,000 pesos ($207) per month renting out five rooms in the boarding house alone. “There were a lot of business opportunities that came up and we cornered them all.”

 

Shuttle Rides

 

The number of bakeries, banks, drugstores and other businesses operating in General Trias increased threefold to 2,729 last year from 903 in 1996, the local government says.

 

Santa Clara, California-based Intel gave employees free meals, shuttle rides and computers, and sponsored trips to beaches, said Israel Ascano. He worked at the plant for more than a decade and earned 19,500 pesos a month.

 

“Those were the boom days,” said Ascano, 36, who has been unemployed since being fired in October. Intel also dismissed his brother and sister-in-law when it cut about 900 General Trias jobs last year. “It’s such a shock. We never expected Intel to shut down because they have always been generous.”

 

Intel has invested more than $1.5 billion in the Philippines since opening a factory in Manila in 1974 and at one time employed more than 5,000 people in the country. It also generated 36,000 jobs indirectly, according to a study commissioned by the company in 2004.

 

Maglalang, who once worked as a maid in the Middle East, is considering looking for work overseas again.

 

“All my kids are in private school,” she said. “Where will we get the money so they can finish?” – ?