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Applied Materials cuts more jobs

The world's largest maker of semiconductor manufacturing equipment is cutting approximately 11 percent of its staff because of the downturn in the chip market.

Applied Materials, the world's largest maker of semiconductor manufacturing equipment, said it is cutting approximately 11 percent of its staff because of the downturn in the chip market.

In all, the Santa Clara, Calif.-based company will trim around 1,750 employees. Close to half of the cuts will take place at headquarters. Two hundred more will occur in the company's Austin, Texas, facilities.

Despite experiencing a rise in business near the beginning of 2002, the industry has been on a downward spiral since midyear because of cuts in capital spending by Intel, Taiwan Semiconductor Manufacturing Co. (TSMC) and other large chipmakers. Intel's capital budget for 2002, for instance, has dropped from $5.5 billion to $4.7 billion during the course of the year. Most of the capital budget goes to buying equipment.

"This was a painful but necessary decision to make in order to enable the company to align our operations with the current level of business and position for future growth," Applied CEO James C. Morgan said in a statement. "Despite our stringent cost-savings programs, the continuing uncertainty in the marketplace makes it necessary for us to take additional action to lower costs while at the same time preserving our investment in the technology and infrastructure that will enable Applied Materials to emerge from this downturn even stronger."

These are the first layoffs for the company this year, according to a representative. Applied Materials in December 2001 announced it planned to cut 1,700 employees, or about 10 percent of its work force.

Equipment makers must also contend with other trends that are eroding their revenue base. Many chipmakers are increasingly outsourcing manufacturing to foundries like TSMC or collaborating with other chip designers on building fabrication facilities. Intel and others are trying, too, to extend the life of their existing chipmaking equipment. In the end, these trends mean less equipment gets bought.