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1500 Workers Laid Off By Intel in Costa Rica

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As part of its plan to trim its global workforce of 107,000 by 5% by the end of this year, Intel Corporation (INTC - Free Report) recently slashed 1,500 jobs in Costa Rica. The layoffs will occur over the next two financial quarters.

Moreover, Intel announced the termination of all manufacturing activities at the Costa Rican site, where both assembly and test operations are carried out. Intel intends to shift these operations to plants in China, Malaysia and Vietnam.

The Costa Rican Plant, established in 1997, originally had 2,500 employees consisting of engineers, business and human resources staff. After the layoff, 1000 jobs will still exist and Intel plans to generate 200 new positions.

Costa Rica got a double blow as The Bank of America (“BofA”) also announced the shutdown of its operations, which is also one of the largest employers in this Central American country. The closure of operations of these two leading companies will negatively impact the country’s gross domestic product (“GDP”).

Intel, the largest manufacturer of chips, has been facing problems due to the fall in sales of personal computers (PCs). In its fiscal fourth-quarter 2013, Intel’s net income was up 6% on revenue growth of 3%. Even though net income and revenue rose, worldwide sales of PCs fell 7%.

According to research firm Gartner, annual PC shipments declined 1.7% to 76.6 million units in the first quarter of 2014 on a year over year basis. This is the eighth consecutive quarter of PC shipment decline.

Trimming its workforce by 5,000 by the end of 2014 is a part of Intel’s internal restructuring to combat losses due to the fall in worldwide PC sales. Furthermore, it is trying to lower its operating expenses and concentrate more on areas like mobile, wearables and Internet of Things (IoT). These are emerging areas within the technology space with companies like Cisco (CSCO - Free Report) , Google, Apple (AAPL - Free Report) and Facebook (FB - Free Report) among others trying to build a position.

Currently, Intel holds a Zacks Rank #3 (Hold).

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