July 26, 2007 – LSI Corp., the merged entity of LSI Logic and Agere Systems, has agreed to offload its semiconductor assembly and test operations in Thailand, Singapore, and the US, continuing its transition to a fabless manufacturing business model. The overall actions will result in about 2100 layoffs, but will shave about $20-$25 million in annual capex starting next year, with “long-term positive effect on gross margins,” the company said.

The first disengagement is LSI’s 440,000 sq. ft site in Pathumthani, Thailand, which is being purchased by STATS ChipPAC Ltd. for approximately $100 million, including manufacturing equipment and certain other assets. STATS ChipPAC will offer employment contracts the ~1100 LSI employees in the Thailand facility, and will sign a long-term supply agreement with LSI for assembly and test services.

LSI also says it will shift assembly and test operations for semiconductor and storage systems at its facilities in Singapore and Wichita, KS, to contract manufacturing partners by 1H08. The company will, however, maintain its interest in Silicon Manufacturing Partners Pte. Ltd., its IC wafer manufacturing JV in Singapore with Chartered Semiconductor Manufacturing.

The sale of LSI’s Thailand facility “reinforces our transition to a fabless manufacturing business model and allows us to focus our resources on designing and marketing semiconductor solutions,” said Andy Micallef, EVP of operations for LSI, in a statement, adding that the deal “also provides us with assured capacity and access to the same high quality assembly and test services that LSI requires going forward.”

For STATS ChipPAC, meanwhile, the “deal reinforces our position in the data storage and communications market,” and “adds scale and improves the economies of scale of our leadframe business,” noted Tan Lay Koon, company president and CEO.