Intel Corp. (Nasdaq: INTC) is making substantial changes at its passive components plant in San Jose, canceling the long-haul projects originally slated for that facility in favor of enterprise and access parts.

Sources suggested that the 70,000-square-foot manufacturing facility is being shut down, but an Intel spokesman insists that's not the case. He acknowledges that previous projects related to long-haul networking have been stopped, but says the facility is still running. "There is some work going on in that facility," he states.

The spokesman confirmed that some of the 100 employees had been reassigned but didn't have a figure for how many remain.

At the same time, Intel Capital has bundled some of its photonics investments together for sale, according to one source. The spokesman wouldn't comment other than to say that occasional divestitures are part of Intel Capital's normal portfolio management. He notes that Intel has added to its optical portfolio recently, with investments in the likes of ASIP Inc. (see ASIP Gets $16M Boost).

Not all of Intel's optical projects are in jeopardy. The LightLogic facility in Newark, Calif., is still going strong, according to sources inside the company (see Intel's 10-Gig Shopping Spree). And Intel's research labs are continuing work on a silicon-based laser, details of which might be revealed at the Intel Developer Forum in September.

Intel has spent the last few years pushing hard to become a player in optical networking. Acquisitions along those lines have included LightLogic, GIGA A/S (a maker of forward-error-correction chips), and the tunable-laser business of New Focus Inc. (Nasdaq: NUFO) (see Intel To Acquire Optical Chipmaker and Intel Scoops Up New Focus Laser Unit).

The San Jose facility, home to Intel's Photonics Technology Operation, was announced in May 2002. Its initial staff of 100 included roughly 10 employees picked up from the acquisition of Tempex (see Intel Intros Photonics Unit and Intel Snaps Up Templex ).

The PTO group was created to develop passive components such as Arrayed Waveguide Gratings (AWGs), and its business focus was on customized parts and contract manufacturing. It was not part of Intel's Optical Networking Group, which houses nearly all of the company's optical networking efforts.

Intel's fascination with optical networking stems from its position of strength in manufacturing. Photonics is frequently compared to the early semiconductor industry, where much of the work was custom and very little of the manufacturing automated. Arguably, Intel's success in semiconductors comes down to manufacturing, and that's the advantage the company has been hoping to wield in optical components.

— Craig Matsumoto, Senior Editor, Light Reading