Narayan AmmachchiIntel is rumored to be laying off more than 1,500 employees in Costa Rica and moving its manufacturing units to Vietnam. Neither Intel nor the Costa Rican government has dispelled the rumor, with the latest report saying Costa Rica’s president-elect is meeting Intel executives in a last ditch attempt to prevent the chipmaker’s departure.
According to reports in local Spanish-language newspapers, Intel is not laying off anyone in its services divisions, but thousands of people working on Intel’s microprocessor supply chain could be affected.
The employees of Intel Costa Rica assemble and test microprocessors, design electronic circuits, and provide financial services for the entire corporation. The US chip manufacturer is one of the biggest private sector employers in Costa Rica.
Local economists, according to the press, are worried because they believe Intel’s closure of manufacturing units will deal a heavy blow to the Costa Rican economy already reeling from rising public expenditure.
Intel has a huge influence on the Costa Rican economy, with its chip business accounting for nearly 6% of the Central American country’s GDP. Intel’s microprocessors also make up about 20% of Costa Rican exports.
Some analysts have cited rising electricity prices as the reason for Intel’s departure to a low-cost destination in Asia. Intel is the leader in the market for microprocessors, but mobile and server makers are now finding chip production increasingly expensive.
According to local newspaper La Nación, Intel will shift its manufacturing unit but will hire about 200 people for other operations in the country.
Since 1997, Intel has invested over $800 million in Costa Rica and employed nearly 2,700 people. Intel Costa Rica has also donated computers and other digital equipment to over 20 area schools, establishing model classrooms where teachers can use technology resources to improve the teaching of math, science, social sciences, and language.
Unfortunately this is now confirmed. A huge blow to Costa Rica. You need to think in terms of the damage to GDP(6%) and exports (20%). These are gigantic numbers for a relatively small economy. You add to that the recent announcement by Bank of America, and now Costa Rica has a big problem to solve: how do you substitute 20% of your exports (the ones with high value added components), and how do you substitute 3,000 highly paid jobs that I am sure supported many thousand (5x?) other jobs. This in a country with less than 5 million people, and in a city with less than 1 m people. When I read the papers from Costa Rica, I am not sure the notes reflect the enormity of this issue. I wish the best to our Tico friends and colleagues. This could create an opportunity to others to hire the highly skilled people hat now do not have a job.