LSI switch to CM threatens 2,100 jobs

LSI Corp. has announced a global switch to contract manufacturing (CM). The move, which would roughly translate to 2,100 job cuts, is part of the company's restructuring scheme following its merger with Agere Systems Inc. last April.

LSI said its plan of action includes agreeing to turn over its semiconductor assembly and test operations in central Thailand to STATS ChipPAC Ltd for approximately $100 million. Under the terms of the acquisition, STATS ChipPAC, a Singapore-based company that specializes in semiconductor packaging, will absorb all the manufacturing employees based at the 440,00sq.ft Pathumthani facility, with the remaining workforce expected to continue their employment with LSI. The two companies are set to put to paper similar agreements in the future, including one on wafer assembly and test.

LSI will also transfer its chip and storage systems assembly and test operations in Singapore and Kansas, USA, to its CM partners in a bid to reduce costs and improve gross margins.

The transfer of operations should be finalized as early as 2H 2008, it said in a statement.

"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," said Abhi Talwalkar, LSI president and CEO. "Additionally, we anticipate significant benefits from additional sourcing options and worldwide fulfillment capabilities."