LSI Logic Axes 1,400

In a continuation of ritualistic cost-cutting measures in the tech sector, chipmaker LSI Logic Corp. Wednesday pink-slipped 1,400 people, or 20 percent of its global staff.

The Milpitas, Calif. firm also vowed to restructure Tsukuba, Japan-based manufacturing operations, as well as shed its CDMA handset and DSL standard product business units. LSI Logic is also consolidating its U.S. manufacturing activities and process R&D into the company’s Gresham, Oregon campus. The company has already closed its Colorado Springs and Santa Clara manufacturing facilities.

Wednesday’s cost reductions are expected to slash sales and operating expenses by about $30 million per quarter. As a result of the moves, LSI is planning for a $50 to $70 million related charge in the first quarter of 2002.

Chipmakers who struggled this year may have taken similar measures, but most of those were no doubt taken in 2001, when the industry bottomed out. Wilfred J. Corrigan, LSI Logic chairman and chief executive officer, said LSI recently reached bottom.

“We believe that both our semiconductor component and storage systems businesses have bottomed and we expect our overall revenues to grow in line with the semiconductor industry this year,” said Corrigan. “However, we are taking these actions to bring into line our cost structure with our present revenue stream and to return to profitability as expeditiously as possible.

Few analysts disagree that 2001 was a bruising year for semiconductor manufacturers, but most analysts also see 2002 as a resurrection of sorts. Gartner’s Dataquest Inc. said in a recent study that the worldwide semiconductor capital spending and equipment markets revenue declined by 29 and 37 percent, respectively. These figures are characterized by weak demand and decreased capacity utilization.

“A macroeconomic recovery and returning electronic equipment demand should finally bring the demand-component of the down cycle under control. However, overcapacity remains excessive and still demands industry attention,” said Klaus Rinnen, chief analyst and director of Gartner Dataquest’s semiconductor manufacturing group. “With demand firming, the semiconductor industry will be afforded increasing visibility, finally being able to plot its course to another up cycle.”

LSI Logic will report its 2001 and fourth quarter financial results, along with first quarter 2002 guidance, on Wednesday, January 23, at the close of market.

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