Intel is offloading its loss-making flash memory business to a new joint venture but about 2,000 Irish employees working in the area have been told that their jobs will not be moving.
Intel is combining its flash memory business with that of STMicroelectronics in a joint venture that is also backed by US private equity firm Francisco Partners.
The new company will manufacture flash memory that is used in consumer and industrial devices such as mobile phones, MP3 players, digital cameras, computers and other high-tech equipment.
The deal does not cover Intel's Irish flash manufacturing unit, Ireland Fab Operations (IFO), which is understood to employ just under 2,000 people.
Including IFO in the joint venture would have proved logistically difficult as it manufactures 65 different Intel products, many of which are not flash-based.
The way the factory is currently set up means different products run through the same machinery, so separating the flash memory business would have been difficult, if not impossible.
In a e-mail sent to staff yesterday, Jim O'Hara, general manager of Irish operations, said that IFO would stay within Intel but would become part of existing business divisions.
"Intel is a large shareholder in the new company and IFO will play a key role in its success," Mr O'Hara said in the e-mail. "There will be a transition period of several months before the new company is launched, after which we will provide wafers via Intel through a supply agreement with the new company."
A decision on the flash unit had long been expected as it was losing on average $120 million a quarter. Staff at the Leixlip plant had feared there would be significant redundancies as a result.
A spokesman for Intel Ireland said there would be no "real impact on the Irish operation and there will be no employees moving". He was unable to give any further details of the supply agreement between Intel and the new joint venture.
Intel will own 45.1 per cent of the new company and will also receive a $432 million cash payment at close. STM will hold 48.6 per cent of the equity and get $468 million in cash when the deal closes. Francisco Partners is investing $150 million in cash for preferred stock, which gives it a 6.3 per cent stake.
The e-mail from Mr O'Hara to staff at Leixlip suggests that despite the financial performance of the flash memory division, IFO was performing well.
"Our performance in both our flash and logic businesses over the last number of years has been outstanding and I want to thank each of you for the real difference you have made," said Mr O'Hara. "I have no doubt we will continue that trend in the coming months and years."
In another e-mail sent to staff yesterday, Intel chief executive Paul Otellini said approximately 4,000 Intel employees in Israel, the Philippines, China and the US would join the new company.
