AMD To Ax 2,300, Close Two Facilities

AMD To Ax 2,300, Close Two Facilities

Jeffrey Burt

Chip maker Advanced Micro Devices Inc. said today it will lay off 2,300 workers and close two facilities in Austin, Texas.

The Sunnyvale, Calif., company has been stung in recent months by defections by OEMs and the downturn of the economy, but an AMD spokesman today said the layoffs and closings have more to do with the function of the facilities than the economy.

About 90 percent of the work done at the two fabrication facilities-Fab 14 and Fab 15-was foundry services, where AMD made chips for other companies, said John Greenagel, director of strategic communication. The other 10 percent was manufacturing other products, such as embedded processors.

The facilities primarily made chips for Legerity, a company AMD spun off last year as it spun off its voice communication business, and for Lattice Semiconductor Corp. after it bought AMD’s programmable logic subsidiary Vantis Corp. for $500 million in 1999.

When demand from those two companies for the chips started to fall off, it no longer made sense to keep the facilities-which AMD planned to close later-open, Greenagel said.

“It’s not our strategic business,” he said. “The [falling] demand for those services to those customers doesn’t make it practical” to keep the facilities open.

Almost all of the jobs that are being lost are tied to the two facilities, either directly in manufacturing or in support staff, Greenagel said. The layoffs-about 15 percent of AMD’s work force-and closings are expected to be completed by the end of the second quarter of 2002.

The news came on the same day that Gateway Inc. said it will no longer use AMD’s Athlon chip in its PCs, instead opting for microprocessors from Intel Corp.

The embattled San Diego-based PC maker said the decision was based on costs and the desire to streamline product lines.

Greenagel would not say how much business AMD had with Gateway but said that the company had gone through this same situation in 1999, when the computer maker moved from AMD to Intel technology, only to come back to AMD’s Athlon chip the following year.

Greenagel said he was optimistic Gateway would work with AMD again. Although new Gateway products may use Intel technology, Gateway still is selling current products with AMD chips.

“They’ve left the door open relative to working with them, and we’ll try to do that,” Greenagel said.

AMD has been hit this year as PC makers struggle with falling sales. For example, IBM said it will no longer use AMD chips in computers sold in North America and Europe.

AMD is scheduled to announce earning after the markets close Oct. 17.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in eWEEK.