IBM's microelectronics unit sheds 1,500 jobs

IBM Corp. announced more layoffs Tuesday, this time in its microelectronics unit, which manufactures and distributes memory, storage networking and PowerPC chips.

A total of 1,500 jobs, representing 7.5 percent of the approximately 20,000 employees in the microelectronics unit, will be cut, said Bill O'Leary, director of communications for the microelectronics unit. IBM's microelectronics unit is spread across three main locations: East Fishkill, New York; Burlington, Vermont; and Endicott, New York.

This is an "involuntary action," said O'Leary, meaning the cuts will not come through an early-retirement program. Affected employees will remain on the IBM payroll for 30 or 60 days, depending on the laws of the state in which they work. They will receive outplacement services and severance packages with up to 26 weeks of pay, depending on their length of service to IBM, he said.

IBM is refocusing its chip divisions on services, including high-end foundry services, said O'Leary. The company will provide some design assistance to customers looking to outsource the manufacturing of chip designs to foundries, which have traditionally just been mass-production sites for chip designs. IBM can offer the latest technologies in chip production, which many foundries can't compete with, he said. A new manufacturing fab line to serve these customers will be created in East Fishkill, with some of the operations spread around the other sites, he said.

As a result of the new focus on outsourced chip production, the skills of the affected workers no longer fit in with IBM's direction, O'Leary said.

IBM, based in Armonk, New York, announced layoffs at four manufacturing plants two weeks ago, one of which was the Endicott location, a source said at the time. IBM announced the sale of its hard disk manufacturing processes to Hitachi Ltd. Tuesday, creating a new company owned mostly by Hitachi. The microelectronics unit and the hard drive business are both part of the IBM Technology Group, which is being realigned into a new business unit focusing on system design, O'Leary said.

IBM's stock (IBM) was trading at US$78.55 per share during midday trading, up .56 percent from Monday's close.

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