Intel Corp. announced plans on Tuesday to lay off 11 percent of its workforce – roughly 12,000 people – from the chipmaking giant’s global operations and to consolidate some of its plants.
It’s not yet clear how the cuts will affect Intel operations in Rio Rancho – or whether it is one of the ones on the chopping block – but the plant has already seen its numbers drop significantly in recent years with little new investment by Intel. And it continues to produce older chips that are less useful for today’s technologies.
The layoffs are part of a broad restructuring plan to stay competitive in the semiconductor industry as markets continue to move away from personal computers, which the company has dominated for decades, to mobile devices such as smartphones and tablets.
Intel now employs about 107,000 worldwide.
The restructuring plan includes a combination of voluntary and involuntary departures by employees, culminating in the full 12,000-worker reduction by mid-2017. Most affected employees will be notified in the next 60 days, although reorganization efforts will stretch into next year.
In the meantime, Intel is not publicly discussing which corporate sites will face cutbacks.
“We’re not providing any site-specific information at this time,” Intel New Mexico spokeswoman Natasha Martell Jackson told the Journal .
The Rio Rancho workforce has already shrunk 42 percent since 2013, when it employed 3,300 people. According to Intel’s latest annual head count, which the company released to the Sandoval County government Tuesday afternoon, 1,900 people are now employed in Rio Rancho.
The drop includes a company plan, announced in late 2013, to cut the local workforce by about 400 people, followed by ongoing attrition since then.
“It’s based on regular, normal attrition, including retirement, relocations and resignations,” Martell Jackson said.
Intel has been struggling to remain competitive in recent years because of its slow entrance into the mobile devices market. It’s developing new chips and building customers in those markets, but progress is slow. And, with global PC sales declining, Intel needs to shore up its finances.
On Tuesday the company reported a 7 percent increase in revenue for the first quarter of 2016 compared with the same period last year. But compared to the immediate preceding quarter from October-December, revenue declined 8 percent, and net income plummeted 43 percent.
Through restructuring, the company wants to improve its finances and direct more resources into developing its mobile, data service and cloud-based technology markets.
Rio Rancho may be hard-pressed to stay relevant during the transition, since the New Mexico plant is producing older, 32-nanometer chips.
The fact that the Rio Rancho facility has had no significant new investments since 2009 puts it well behind the curve compared with other Intel plants that are now producing 22- and 14-nanometer chips. And, with the company scaling back operations at targeted sites, upgrading the New Mexico plant seems unlikely.
“It’s a story of technology evolution,” said Ken Dulaney, vice president of technology research firm Gartner Inc. “Intel is eyeing more business in the data server and mobile markets, and that’s unlikely to be done with 32-nanometer chips.
“Conditions could change for the company to rebuild its base here, but most companies today are looking elsewhere around the world as traditional manufacturing environments lose favor.”
Rio Rancho Mayor Gregg Hull said the city is waiting for an official announcement on changes at the local plant before commenting on Intel’s plans in New Mexico.
“We’re keeping a close monitor on any announcements to come out, but we haven’t received anything yet,” Hull told the Journal . “But our resolve and commitment to keep Intel as part of our community is priority No. 1 for us, as it is for the city of Albuquerque and state of New Mexico. … We’re hoping for the best.”
Click here to see a copy of the email Intel CEO Brian Krzanich sent to employees.