Texas Instruments Inc. plans to pull all but a handful of its 250 people out of Orange County amid soft demand for chips in a slowing economy.
“We’ll keep a sales operation there but we plan to move virtually all of them,” said Texas Instruments spokesman Kim Quirk.
Currently, the Dallas-based chip maker has a design center in three buildings in Tustin. The company plans to consolidate the buildings into one and offer some employees the option of relocating to Dallas, a move the company doesn’t expect many employees to take. Employees who choose to stay in OC will be laid off.
“We’re planning to consolidate most employees from Tustin to Dallas to a larger design center there,” Quirk said. “We have no idea if they’re willing. After all, it is Orange County, but we’d certainly love to have them here.”
Texas Instruments’ move comes after the company reported first quarter revenue down 8% from the year-ago period and off 17% from the prior quarter. To combat the slowdown, Texas Instruments in the first quarter began to aggressively slash costs, putting into place voluntary retirement programs, mandatory time off and manufacturing consolidation.
While the company beat lowered estimates for the first quarter, executives aren’t so sure about the current quarter. Texas Instruments plans to cut 2,500 jobs in all,or 6% of its workforce. The cuts, including the company’s downsizing in OC,are expected to save nearly $400 million annually, executives said.
“We are in one of the sharpest decelerations that our industry has experienced, and it requires that we move fast to make hard but prudent business decisions,” said Texas Instruments Chief Executive Tom Engibous in a statement. “The most difficult decisions are layoffs, because they affect our people.”
Along with other OC chipmakers, Texas Instruments has watched its customers slow down purchases of its chips, which go into wireless phones and mobile devices. Texas Instruments doesn’t expect to see growth resume until well after the current quarter,a period in which management expects sales to decline about 20%.
“We believe Texas Instruments will continue to see its revenues impacted by higher-than-expected inventories in the handset channel, coupled with slower-than-expected demand,” said Thomas Weisel Partners LLC analyst Eric Ross.
Even though Texas Instruments was on a growth curve six months ago, the company already had restructured its Tustin facility, downsizing twice in the past two years. The Tustin facility operated as Silicon Systems Inc., a unit of Japan’s TDK Corp., until Texas Instruments bought it in 1996. In 1999, the operation was downsized once and then scaled back again after a product line being developed at the facility was eliminated. In all, 38% of Texas Instruments’ Tustin employees were given pink slips then. n
