Hit hard by the downturn and slowing sales, Intel plans to shift the operations from Shanghai to Chengdu over the next 12 months, according to the report.

The chip giant will give affected employees an option to work at the company's Chengdu or Dalian sites in China, according to the report. Intel has an IC-packaging plant in Chengdu, China. The Chengdu site employs over 600 people.

Recently, Intel announced plans to build a 300-mm wafer fabrication facility in the coastal Northeast China city of Dalian. The $2.5 billion investment for the factory will become Intel's first wafer fab in China.

Last month, the chip giant said it will close two fabs and three IC-assembly factories. The actions at what comes to four sites, when combined with associated support functions, are expected to affect between 5,000-to-6,000 employees worldwide.

The company plans to close two existing assembly test facilities in Penang, Malaysia and one in Cavite, Philippines. It will halt production at Fab 20, an older 200-mm wafer fabrication facility in Hillsboro, Ore. Additionally, wafer production operations will end at the D2 facility in Santa Clara, Calif.

It's unclear if the actions at Shanghai are part of the overall layoffs at Intel. Intel has three major operations in Shanghai. This includes manufacturing, labs, software development, and sales and marketing.

It will apparently keep the lab and other functions in Shanghai. Intel Products (Shanghai) Ltd. had been Intel's IC-packaging site facility in Pudong. The current investment is $500 million at the site.

In the late 1990s, the Shanghai facility began assembling and testing flash memory. In 2001, it started assembling and testing Intel's chipsets. It is also doing some flash technology development.

Recently, Intel said fourth quarter 2008 net income fell to $234 million, or 4 cents per share, hit hard by a $1.2 billion loss on equity investments related to its interest in Clearwire Corp.

In the year-ago comparable quarter Intel posted net profit of $2.3 billion, or 38 cents per share. Revenue in the three months ended Dec. 27, 2008 sank to $8.2 billion, down 23 percent as previously predicted, from $10.7 billion in the comparable 2007 quarter.

Intel said it cannot "predict product demand" for the first quarter and has therefore declined to offer its typical revenue and profit forecast but instead will work off a temporary number that calls for a 15 percent sequential sales decline on top of the 19 percent drop from the third quarter of 2008.