October 1, 2001 – Sunnyvale, CA – Advanced Micro Devices Inc. (AMD) will close two older factories in southeast Austin and cut 1,000 jobs during the next nine months.
The job reduction is one of the largest among Austin-area high-tech companies over the past year.
Only Dell Computer Inc., which has cut more than 5,000 jobs in the Austin area this year, has eliminated more local jobs. Motorola Inc. announced it would cut 4,000 semiconductor jobs worldwide in February, but only about 1,000 of those cuts were thought to be in Austin.
AMD said it also will eliminate another 1,300 jobs in Penang, Malaysia, as the company reorganizes its chip packaging and test operations, which are concentrated in Asia.
The plant closing announcement came on the same day that one key customer, computer maker Gateway announced that it was dropping AMD as a supplier of processor chips for its computers in favor of Intel Corp.
Analysts said the Gateway announcement is a sign of fierce cost cutting in the personal computer business that has spurred price reductions by AMD and Intel.
AMD reported strong earnings in the first quarter, which ended April 1, but reported a narrow profit and falling sales in its second quarter. AMD’s second quarter, which ended July 1, saw a profit of $17.4 million on sales of $985.3 million. Sales were down 16% and profits were down 92% from a year ago.
The company has said it will record an operating loss with another 15% decline in revenue for the current quarter.
The company expects to save about $125 million a year in operating costs because of the cuts. It will take a one-time charge against earnings of between $80 and $110 million in the current quarter to cover the costs tied to the closing.
The products from the affected plants — called Fab 14 and Fab 15 — “were older line communications and networking and embedded products,” said Gary Heerssen, the group VP who heads the company’s global manufacturing operations. “The market for those products has essentially gone away.”
The factories made AMD chips and the products of two AMD spinoff companies, Austin-based Legerity Inc. and Lattice Semiconductor Corp., which is based in Hillsboro, OR.
Legerity officials said their company has alternative sources to produce its telecommunications chips.
The company’s first Austin job cuts will occur in October, but some workers will remain with the company until next June as production is gradually phased out.
Not all the job cuts are tied to the plant closings. AMD also will trim 150 jobs from its largest and newest Austin factory, Fab 25, as that facility undergoes a major change in products. During the next year, AMD plans to revamp Fab 25 and shift its production from computer processor chips to flash memory chips.
AMD said the closings will not affect the company’s decision on where it will build its proposed next-generation factory, called Fab 35. Austin and several other communities in central Texas remain in the running for that proposed project, which could cost more than $3 billion to build and equip. The location for that project will be announced sometime next year.
The factory closings leave AMD with two major factories that it runs — Fab 25 in Austin and Fab 30 in Dresden, Germany — as well as three factories in Japan that is owns jointly with Fujitsu Ltd.