National Semi to cut jobs, sell units

National Semiconductor will cut 5 percent of its work force and sell two of its divisions as part of a restructuring plan, the company announced Thursday.



The Santa Clara, Calif.-based chipmaker will eliminate 500 jobs from its manufacturing, product development and administrative operations, reducing its worldwide staff from about 10,000 employees to approximately 9,500.




Due to the job cuts, National Semiconductor will take a charge of $35 million to $45 million in its third fiscal quarter, which ends Feb. 23. Going forward, the company expects to save $15 million per quarter.



The company also announced it will sell its cellular baseband business and its Information Appliance unit, which includes its Geode processor for set-top boxes and other electronics devices.



In an interview, CEO Brian Halla said that the company doesn't want to have to compete with Texas Instruments and Intel on the baseband side. And while he is still a firm believer in the idea of Internet appliances such as the Web-surfing tablets the company has long touted, Halla said the market is just taking too long to mature.

"It's not enough to have the bow pointed in the right direction, you have to make sure the stern isn't under water," Halla said.





The Geode chip, one of the last vestiges of National
Semi's x86 processor business, was part of a push by the company to
take on Intel in the PC business.


National Semiconductor entered the PC market in 1997 with the purchase of chipmaker Cyrix. But two years later, National Semi left the PC business and sold Cyrix to Via Technologies, retaining only the Cyrix Media GX, which later became the National Semiconductor Geode.


Once the two product lines are sold, National Semiconductor plans to focus its efforts on its radio frequency, power management, amplifier, audio and display chip lines for markets such as cellular phones and flat-panel displays.


The company also announced that it signed a manufacturing agreement with Taiwan Semiconductor Manufacturing Corp. The deal will allow National Semiconductor to deliver smaller, faster chips without having to incur the costs of building a new chip manufacturing plant, the company said.


Halla said that National can still grow in the analog business, pointing out that products like digital cell phones with camera attachments use far more analog chips than their analog predecessors.

"Over the last couple of years what's really become obvious is that we can be very successful in the analog business...without having to make huge investments to do that," Halla said. "Why would you continue placing $10 roulette bets on double-zero when you found a quarter slot machine that always pays off?"

Halla said that National would have to spend upwards of $2 billion to build a new manufacturing plant using the latest technologies such as 300mm wafers. While National is keeping its current plants in Scotland, Arlington, Texas and South Portland, Maine, the company is unlikely to build new plants anytime soon.

"Its certainly unlikely that you'd ever see another advanced digital CMOS fab" from National," Halla said. Halla said he expects fewer and fewer chipmakers to be able to keep up with the costs of new plants.

"Any new fabs not built by companies the size of IBM and Intel will most likely be built by partners," he said.

Although National is hoping to sell its Net appliance business, one thing the company may not be able to pass on is the patent license from Intel that allows National to produce chips compatible with Intel's x86 architecture. Although National is not looking to keep the intellectual property rights, it may find it has no other choice.

"There are certain kinds of transfer capabilities we don't have," Halla said.




In Thursday midday trading, National Semiconductor shares rose 70 cents, or 4.87 percent, at $15.08.