LSI to shed IC
assembly and test operations
Move is expected to achieve greater cost efficiencies through the adoption of a variable cost structure and to provide for scalable capacity without additional capital investment
LSI Corp is to switch worldwide assembly and testing of its semiconductor and storage systems products to contract manufacturers. The initiative is expected to achieve greater cost efficiencies through the adoption of a variable cost structure and to provide for scalable capacity without additional capital investment.
The initiative is part of a previously announced three-phase business acceleration plan adopted by LSI following its merger with Agere Systems on 2nd April 2007.
In connection with this initiative, LSI has signed a definitive agreement to sell its semiconductor assembly and test operations in Pathumthani, Thailand to Stats ChipPac for approximately US $100 million.
The Thailand facility consists of approximately 41,000m2 of floor space and employs approximately 1100 people.
Under the terms of the agreement, Stats ChipPac will offer employment to substantially all of the LSI manufacturing employees based at the site, with the remaining nonmanufacturing workforce expected to continue their employment with LSI.
Stats ChipPac and LSI will also enter into additional agreements, including a multi-year wafer assembly and test agreement and a transition services agreement.
The transaction is expected to close within 90 days, subject to the satisfaction of customary closing conditions and regulatory approvals.
LSI also intends to move semiconductor and storage systems assembly and test operations performed at its facilities in Singapore and Wichita, Kansas to current contract manufacturing partners.
The transition of these operations is expected to be completed in the first half of 2008.
As part of the above actions, LSI will eliminate approximately 2100 production positions worldwide.
The transition is expected to reduce annual capital expenditures by US $20 to $25 million beginning in 2008 and to provide a long-term positive effect on gross margins.
Abhi Talwalkar, LSI President and CEO, says: 'As a result of the steps we are taking today, LSI will be well positioned to leverage the worldwide contract manufacturing ecosystem to further reduce our costs and improve our gross margins over time'.
'Additionally, we anticipate significant benefits from additional sourcing options and worldwide fulfilment capabilities'.
LSI is continuing to maintain its interest in Silicon Manufacturing Partners, its integrated circuit wafer manufacturing facility in Singapore, which is jointly owned with Chartered Semiconductor Manufacturing.
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