AMD cuts 15% workforce, closes two fabs

The terrorist attack appears to be accelerating the latest wave of lay offs

in the semiconductor industry in the United States, which got under way about

three weeks ago after a series of massive lay offs were announced in Japan.

Advanced Micro Devices said it will fire 2,300 people, some 15 per cent of

its work force. The company will also shut down two older chip fabs in Austin,

Texas.

About 1,000 of the laid off workers are employed at the Texas fabs. The other

1,300 workers to be laid off work in facilities in Penang, Malaysia. AMD will

save an estimated $125 million in annual expenses following the job cuts and

plant closings.

AMD said it will take a third-quarter charge of $80 million to $110 million.

AMD will likely have a massive loss as a result. On August 29 the company

already forecasted it expected to lose money on its operations in the current

quarter due to slumping demand and fierce competition from Intel.

Investors on Wall Street are now bracing for more bad news to be released in

the next week or so by Intel.

AMD suffered a double blow this week as one of its major customers, Gateway

announced it is phasing out the AMD processors and will rely exclusively on

Intel instead. Although Gateway is undergoing a major transition, the decision

to drop AMD is seen as a blow to AMD.

Gateway said it will eliminate the "Select" line, which used AMD's

Athlon processors. "This is all part of Gateway's efforts to simplify our

product line and to reduce the number of component suppliers we use," said

Gateway spokeswoman Lisa Emard who added that the move will also help Gateway

cut engineering and manufacturing costs.

AMD has fallen behind Intel in the processor performance race. And while AMD

is readying a new generation of Athlon processors, some computer manufacturers

such as Gateway no longer have the luxury of time to wait for AMD's response to

Intel's 2GHz processors.

AMD's shares are now trading below $10 a share, a third of the value just six

months ago.