Motorola to down more chip design sites

CHICAGO: Motorola Inc. one of the world's largest makers of semiconductors, said it is seeking to expand efforts to build chips for outside companies as part of a plan to return its semiconductor unit to profits.

Motorola's semiconductor business, which accounted for almost 18 percent of the company's overall sales in the second quarter, has lost money over the last several years as weak demand forced it to shutter or sell more than 12 plants.

"All we've tried to say now is we're going to be more open to those kinds of activities and not create a huge foundry model," Scott Anderson, the company's chip unit president and chief executive, told analysts at a company meeting in Boston.

In addition to boosting the unit's sales, Anderson is also focused on getting costs for the unit down, including further job cuts.

Making chips for others is part of Motorola's plan to boost capacity usage in its eight global chip plants from the high 60 percent range in the second quarter to more than 80 percent over the next few years.

"We've talked about finding external foundry partners that will use internal Motorola capacity. We just last week signed a deal with a substantial size foundry," Anderson said.

He declined to identify the company or provide other details of the new agreement, which a spokesman said is still being finalized. It would build on similar deals Motorola has signed in the past with other companies, including Qualcomm Inc.

"From that point of view and the slight improvement that we've talked about in terms of sales from the second (quarter) to the third, we have seen some improvement in (capacity) utilization over that period of time," Anderson said.

Motorola said it will concentrate on offering a handful of other companies unique technologies rather than simply build basic chips like other Asian semiconductor foundries.

Motorola's chip unit, the Chicago area company's second largest business behind its cell-phone segment, saw second-quarter sales fall 11 percent to $1.1 billion and reported a $134 million operating loss excluding special items. In July it said it expects third-quarter sales to rise slightly from the previous quarter while the loss should narrow.

Motorola in July said its long-term target for the chip business is annual sales growth of 8 to 10 percent and a 15 percent operating profit margin.

Anderson said the company will achieve its goals through higher sales, making chips for outside companies, bringing back inside company work currently done by outside manufacturers and reducing expenses, including further job cuts.

"We are ... looking at right-sizing some of the factories in terms of labor," Anderson said.

A company spokesman said any further job cuts will be small as the large actions have already been taken. Motorola's chip unit employed 24,000 people at the end of the second quarter, down 29 percent from the year-ago quarter.

The company said it is in the process of closing a number of chip design sites around the world as a way to develop products faster.

© Reuters