Word: semiconductor
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...approaching holiday season holds little joy for thousands of employees and executives in the semiconductor industry. This year major makers of the tiny electronic wafers, which are the raw material of the high-technology age and run everything from watches to supercomputers, are playing the role of the Grinch. They will shut their doors for up to three weeks next month, a time when workers normally expect year-end bonuses and office celebrations. The painful closings are only the latest steps that chip producers are taking to cope with a slump that has crippled the once booming high-tech industry...
...downturn already rivals the depressions that have struck car-and steelmakers in recent years. Some 64,000 semiconductor employees have been laid off in the past ten months, a toll that equals 19% of the industry's U.S. work force. The top five chip producers, including Intel, Motorola and Advanced Micro Devices, lost a total of $195 million in the quarter ending in September, and the red ink keeps flowing...
While the semiconductor slump is centered in Silicon Valley, the industry's hub, it extends well beyond that California region. United Technologies said last month that it was permanently closing its Mostek subsidiary in suburban Dallas and laying off 2,500 workers in Texas and 3,200 worldwide. The decision followed more than a year of intense and often agonizing cost cutting. Said Marie Gentilo, 45, a Mostek quality-control worker: "There is nothing for us. Some of us are too old to get new jobs...
Indeed, the slow growth of the computer market has been a chief source of the chipmakers' woes. They hastily built new plants and hired workers after personal computers, which are major users of semiconductors, became best sellers in 1983. But the popularity of desktop machines has so far failed to grow at the euphoric rate that experts predicted. Instead of doubling, personal-computer sales will do well to rise by 30% in 1985. That slower than anticipated growth, combined with weak demand for other types of computers, has contributed to a sharp drop in semiconductor prices. Result: worldwide chip revenues...
...company has managed to keep growing. Despite AMD's recent resurgence, Intel's position in the PC-chip business remains unchallenged, with a market share of nearly 90%. It is also a step ahead thanks to Barrett's farsighted investments in manufacturing. While AMD has one major semiconductor plant, Intel has four placed strategically around the world, churning out chips 24 hours a day. And unlike PC manufacturers and retailers, who have to deal with wafer-thin margins, Intel--thanks to its dominant position--enjoys a 55% profit margin on every $300 PC chip. "Most companies would kill...