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In addition to the substantial job cuts, the company announced that it will close Fabs 14 and 15, two semiconductor wafer fabrication facilities in Austin, Texas that primarily serve AMD's foundry operations. Approximately 1,000 of the company's 2,300 layoffs are associated with closing the facilities in Austin. The balance of the reductions will result from realigning and restructuring back-end activities in Penang, Malaysia, the company said on Tuesday.
The move by AMD follows a decision earlier in the week by Gateway to phase out its last line of PCs that use AMD processors. The Gateway decision is not the first blow of its kind for the world's number two chipmaker, which also lost Micron PC and IBM as customers earlier in the year.
The company said it would take a one-time charge of between USD80 million and USD110 million to cover the restructuring activities and other special items in the current quarter. AMD said the factory closures and the job cuts, which represent 15 percent of the current workforce, would be completed by the end of the second quarter of 2002 and the company expects to save around USD125 million annually.
The decision by the company will reduce costs without impairing new product development, said W.J. Sanders III, chairman and chief executive officer of AMD. "We will treat all employees affected by these actions with fairness and respect, consistent with our values and our commitment to our people."
In recent months AMD and Intel have been engaged in a price war as both companies faced substantial decline in global demand for semiconductors. Last month it was reported that Intel would cut prices by as much as 54 percent on some of its products, a move that was brought on by already lowered prices from AMD.
It is estimated that global chip sales could fall by as much as 35 percent this year, which in combination with the price war has forced profit margins down substantially. In its second quarter 2001 results, AMD announced that its total sales declined by approximately 16 percent year on year and 17 percent sequentially. Sales of AMD memory products declined by 13 percent from the second quarter of 2000 and by 23 percent sequentially in a continuing weak demand environment, said the company.
In fact, statistics from the Semiconductor Industry Association (SIA) showed that sales in July 2001 were just USD10.86 billion, compared to USD17.29 billion in July 2000. George Scalise, president of the SIA, said the falling figures were due to slow economic activities in all of the major economies, and to excess inventory in the IT market.
Nevertheless, Scalise said that inventories were being reduced, and that the association expects demand to pick up again in the coming quarters. "We expect sales of personal computers, communications products and a variety of handheld devices, including newly introduced digital audio products, will accelerate demand for a broad range of semiconductors," he said. The boost in demand should lead to growth for industry in the December quarter.
While the slowdown in semiconductor sales has hit companies around the world, including Fujitsu and Philips, it also has had great impact on Ireland.
The Irish semiconductor intellectual property company Parthus has taken major hits on the stock market, with share values dropping form around USD6 in late August to USD3.24 at Tuesday's close in New York.
Earlier this year Intel cut jobs in Ireland and is currently delaying construction on its Fab 24 plant in Kildare. Most notably, in August, General Semiconductor closed its Irish plant entirely with the loss of 670 jobs.
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