Chipmaker Skyworks Solutions Inc. has grounded a struggling wireless product line that had big operations in Irvine.
The Woburn, Mass.-based company is cutting about 200 of roughly 450 people at its Irvine site, spokesman Pilar Barrigas said.
The Irvine site mostly employs engineers.
The move is part of a larger cut of 425 Skyworks employees, or about 10% of its work force.
The Irvine operation stems from Newport Beach-based Conexant Systems Inc., a maker of communications chips.
In 2002, Conexant combined its wireless chip unit with Woburn, Mass.-based Alpha Industries to create Skyworks Solutions. The company has had 450 to 500 employees in Irvine since.
Up to now, Skyworks has been the fourth-largest chipmaker in Orange County, trailing its former parent, fellow Conexant offshoot Jazz Semiconductor Inc. of Newport Beach and Irvine chipmaker Broadcom Corp.
Skyworks said the move should spur sales and profit growth as the company focuses on businesses where competition isn’t as fierce with big names such as Nokia Corp. and Samsung Corp.
“We believe it’s one of the most significant events in our history,” Chief Executive David Aldrich said during a call with analysts. “As a result of these actions, Skyworks emerges as a far more profitable, more streamlined and stronger company.”
The company is shutting down a unit that makes baseband chips that go into every wireless phone. The baseband chips help different parts of a phone communicate with each other.
The move leaves Skyworks to focus on radio and analog chips.
Its radio chips go into cell phones.
The company’s analog chips go into some wireless gear as well as into medical devices, autos and other products.
The radio and analog chips are the fastest growing, delivering 17% annual growth each year since the company’s launch in 2002, according to Skyworks.
The company counts yearly sales of about $800 million.
The baseband business made sense early on, Aldrich said.
“History shows us that this has not been the case,” he said.
Nokia, Samsung and Motorola Inc. have used their muscle to gain market share, Aldrich said.
“They leveraged their brand and their economies of scale … This had a devastating effect on these emerging customers and in turn on Skyworks’ baseband business,” he said.
Skyworks’ other businesses are gaining market share, with better profits, according to Aldrich.
The company’s radio chips are going into some of LG Corp.’s Chocolate line of wireless phones. Skyworks’ chips also found their way into Motorola’s RAZR phones.
The company sells chips for wireless networking hubs and works with Broadcom Corp. in the sector.
“We view Skyworks’ decision to exit its declining baseband business as a key move by the company to significantly improve its … earnings growth and profitability,” wrote Daniel Amir, an analyst with W.R. Hambrecht and Co., in a research note.
Skyworks expects the move will slash operating expenses to $215 million, versus Amir’s estimate of $280.4 million for the 12 months through next September.
The company now expects profits of $89 million to $97.1 million, up from earlier estimates of $47 million.
Investors have jumped in. The day after the announcement, Skyworks shares soared 35% with a recent market value of about $1.1 billion.
